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Why does aggregate demand slope downward (negatively) according to the wealth effect?



A. Lower prices increase the value of money holdings and consumer spending increases
B. Lower prices decrease the value of money holdings and consumer spending decreases
C. Lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases
D. Lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls

This question is part of Macroeconomics [Ch. 2
Asked by Emy_, Last updated: May 20, 2020

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2 Answers

ammara mumtaz

Ammara mumtaz

Answered Nov 13, 2017

D. Lower prices increase money holdings, decrease lending, interest rates rise

 

Emy_

Emy_

Answered Oct 10, 2017

Lower prices increase the value of money holdings and consumer spending increases
 

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