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Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i.e. inflation) ________ real wealth and ________ consumption expenditure.

User Zieglar
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Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i.e. inflation) decreases real wealth and decreases consumption expenditure.

Step-by-step explanation:

  • Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i.e. inflation) decreases real wealth and decreases consumption expenditure.
  • When there is a lower inflation rate, it causes the real interest rate to fall and stimulates the investment.
  • Keynesian economics is a theory of total spending in the economy which is also called as aggregate demand.
  • The theory also affects on the output production and inflation.
  • He also believed that unemployment is subject to the unpredictable change of aggregate demand and partly because they believe that prices adjust only gradually.

User Bitten
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