Economics · Macroeconomics
When individual or household income falls, consumption expenditure does not decline proportionately because people try to maintain their highest previously attained standard of living. This asymmetry in consumption behavior is known as the:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Pigou Effect
- 2Ratchet Effect✓
- 3Income Effect
- 4Demonstration Effect
Correct answer
Ratchet Effect
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