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The Pigou effect:
A) suggests that as prices fall and real money balances rise, consumers should feel less wealthy and spend less.
B) suggests that as prices fall and real money balances rise, consumers should feel wealthier and spend more.
C) suggests that as prices fall and real money balances rise, consumers should feel less wealthy but spend more.
D) is generally accepted as adequate proof that the economy must be able to correct itself.
1 . Use the AS/AD model to a . Demonstrate graphically and explain verbally the situation the US economy is currently in. b. In the diagram you drew for part (a) above, sh
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