wealth effect



Changes in aggregate demand caused by change in the value of assets such as stocks, bonds, gold, property. Increase in the market value of these assets induces a feeling of being 'richer' in their owners (even if no additional cash is realized) and often tends to encourage spending and to dampen savings.

Use wealth effect in a sentence

  • The wealth effect was something that everyone liked because the feeling of being rich is something very addictive and fun.

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  • You should try to figure out how the wealth effect may impact your product and come up with strategies to adjust.

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  • Sometimes there will be a change and you will need to figure out how the wealth effect will impact the marketplace.

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