What is PIGOU EFFECT?

A concept of economicts, put forward by Arthur Cecil Pigou, a classical economist. The Pigou effect states that due to a significant decrease in the prices of proudcts, a ‘wealth effect’ would be created, ultimately resulting in full employment. The concept is based on the fact that a large decrease in prices will free up more money for people, allowing for an increase in demand. Howeer, the Pigou Effect does not work in real.

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