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AURORKA [14]
2 years ago
10

When a person receives an increase in wealth, what is likely to happen to consumption and saving?

Social Studies
1 answer:
KiRa [710]2 years ago
6 0

When a person receives an increase in wealth then the consumption increases and Savings decreases. This is related to the theory of "Wealth effect".

The wealth effect states that when the wealth of households rises, it results as rise in asset values, such as corporate stock prices or home values, they spend more and stimulate the broader economy.

The theory is dependent on economic behavior of a person that consumers feel more financially secure and confident about their wealth when their homes or investment increase in value. They are made to feel richer, even if their income and fixed costs are the same as before.

To learn more about Wealth Effect, here

brainly.com/question/19592388

#SPJ4

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Three policies that helped to sustain economic prosperity in the USA after WWI were: 1) increased taxation, 2) becoming a creditor to other nations, and 3) mobilizing federal agencies to help provide the infrastructure for industries that produced munitions and supplies for the war effort.

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Increased taxation: The US government used a combination of raising taxes and selling Liberty Bonds in order to finance the war effort. Tax rates remained higher than they were before the war because there were expenditures like paying interest on the Liberty Bonds and providing benefits for those who had served in the war. To sell the bonds the government arranged big rallies and enlisted famous personalities like Charlie Chaplin to help sell the bonds.

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