Wealth-effect meaning

A tendency on the part of consumers to spend more when they feel wealthier or more financially secure, as when their investments or homes increase in value.
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The tendency of consumers to spend more because they believe they are wealthier. This newfound wealth may come from stock gains during a bull market or the rising value of real estate investments. If a wealth effect becomes too pronounced, it can produce inflation. That was a fear of Federal Reserve policy makers who kept watching for signs of inflation from consumers’ strong spending habits during the record run-up in the stock market in the late 1990s that peaked in 2000.
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