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Friedman and Johnson (1997) show that for a wide range of dynamic optimization problems, supermodularity is both necessary and sufficient for monotone static results. In the present context, this implies that our supermodular model requires the minimum set of assumptions to obtain monotonicity in the optimal decision variables.
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The evidence presented here needs to be supplemented with information about inter- and intrafamily income transfers. This issue was addressed in a follow-up survey, but analysis of the results is not yet complete.
Answer:
The intuition behind the real wealth effect is that when the price level decreases, it takes less money to buy goods and services. The money you have is now worth more and you feel wealthier. So, in response to a decrease in the price level, real GDP will increase.
Explanation:
