Final answer:
A sharp rise in the real value of stock prices represents a change in the real value of consumer wealth, leading to increased consumer confidence and spending. This effect is known as the real-balances effect, and it can lead to a rightward shift in the Aggregate Demand curve, increasing GDP and the price level. Therefore, the correct option is C
Step-by-step explanation:
A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of c. a change in real value of consumer wealth.
This scenario exemplifies the real-balances effect, an economic concept that explains how changes in the real value of securities and other assets can impact consumer wealth and spending habits. When stock market values increase significantly, individuals holding those stocks feel wealthier, leading to greater consumer confidence and a likely increase in consumer spending. This behavioral response can shift the Aggregate Demand (AD) curve to the right, resulting in an increase in the equilibrium level of Gross Domestic Product (GDP) and potentially an increase in the price level over time, illustrating the positive relationship between the stock market and economic activity.