Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i. e. inflation) real wealth and consumption expenditure.

Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i.e. inflation) decreases real wealth and decreases consumption expenditure.

Explanation:

Employing the "Keyneisan" approach (legacy model), according to the wealth effect, an increase in the price level (i.e. inflation) decreases real wealth and decreases consumption expenditure.When there is a lower inflation rate, it causes the real interest rate to fall and stimulates the investment.Keynesian economics is a theory of total spending in the economy which is also called as aggregate demand.The theory also affects on the output production and inflation.He also believed that unemployment is subject to the unpredictable change of aggregate demand and partly because they believe that prices adjust only gradually.

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