How would an increase in wealth affect the aggregate demand curve? Explain.
What will be an ideal response?
A higher price level leads to lower real wealth, which is the definition of wealth effect. Lower real wealth less to decreased aggregate demand. That means AD curve shifts to the left.
Economics
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If the equilibrium price of good X is $5 and a price ceiling is imposed at $4, the result will be a(n):
A. accumulation of inventories of unsold gas. B. shortage. C. surplus. D. quantity supplied that exceeds the quantity demanded.
Economics
A country, such as Argentina in 2002, that is buying its own currency to maintain a given exchange rate
A. has a balance of payments surplus. B. has an undervalued currency. C. has an overvalued currency. D. need not fear a “run” on its currency.
Economics