What is the likely chain of events if asset prices rise?
A) People feel poorer, so their spending falls and their saving rises, causing interest rates to fall.
B) People feel wealthier, so their spending falls and their saving rises, causing interest rates to fall.
C) People feel wealthier, so their spending and their saving rises, causing interest rates to fall.
D) People feel wealthier, so their spending rises and their saving falls, causing interest rates to rise.

Question

Quizplus · Accepted Answer

When asset prices rise, individuals feel wealthier, which typically leads to increased spending and decreased saving. This increased demand for goods and services can lead to higher interest rates as the demand for loans increases.

What Is the Likely Chain of Events If Asset Prices