$12200$

Solution

Al Iutor

Question $6$ of $22$

One explanation for the negative slope of the aggregate demand curve is the "wealth effect" $($aka the "real$-$balances" effect$).$ What is this effect?

For normal goods, people buy more of a product if their income increases.

Interest rates increase when prices rise as consumers try to borrow larger amounts of money to maintain their consumption. The higher interest rate discourages spending.

As inflation occurs, consumers buy fewer goods and services because the value of their accumulated wealth declines.

As inflation occurs, the purchasing power of consumers increases as accumulated wealth increases in value.

According to the wealth effect, what happens as the price level falls?

Consumption spending increases.

Consumption and investment spending increase.

Consumption spending decreases.

Consumption spending decreases and investment spending increases.

Consumption spending increases and investment spending decreases.

$+100$

Consumption and investment spending decrease.