Suppose a stock market boom makes people feel wealthier. What are the effects of this increase in wealth?
A) increased consumption, which shifts the aggregate-demand curve right
B) increased consumption, which shifts the aggregate-demand curve left
C) decreased consumption, which shifts the aggregate-demand curve right
D) decreased consumption, which shifts the aggregate-demand curve left

Question

Quizplus · Accepted Answer

With an increase in wealth due to a stock market boom, people will feel more confident and have more disposable income, which leads to increased consumption. This increase in consumption shifts the aggregate-demand curve to the right as demand for goods and services increases.

Suppose a Stock Market Boom Makes People Feel Wealthier