wealth effect

wealth effect definition - business

wealth effect

The relationship between personal wealth and consumer spending. According to the wealth effect, consumers have a tendency to spend a larger proportion of personal income as their wealth increases. The wealth effect was used to explain increases in consumer spending in the late 1990s, when stock prices boomed.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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