Business, 30.03.2020 21:03 jamilecalderonpalaci

3. Suppose that all households hold all their wealth in assets that automatically rise in value when the aggregate price level rises (an example of this is what is called an "inflation-indexed bond"—a bond whose interest rate, among other things, changes one-for-one with the inflation rate). What happens to the wealth effect of a change in the aggregate price level as a result of this allocation of assets? Will aggregate demand still be downward sloping? Why or why not?

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3. Suppose that all households hold all their wealth in assets that automatically rise in value when...

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