The wealth effect is defined as:
A) an accumulation of money is the hands of a few individuals.
B) the effect of the wealth of a country.
C) the effect of changes in the price level on the value of people's wealth.
D) the effect of changes in the exchange rate on the value of people's wealth.
E) how equity prices influence wealth.

Question

Quizplus · Accepted Answer

The wealth effect refers to the change in consumer spending that results from changes in perceived wealth, often due to changes in the price level affecting the real value of assets.

The Wealth Effect Is Defined As