In economics the wealth effect (Pigou effect) is a change in the value of the assets held by an individual as a result of a change in the price level (inflation or deflation). John Keynes argued that falling prices would reduce the level of aggregate demand and therefore create unemployment. However, if there is a wealth effect, falling prices will raise the value of money held and enhance aggregate demand, implying that the effect of money on the economy is neutral. Research Wealth Effect
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Abbreviations
Research Wealth Effect
