Question

If stock prices go up and people feel richer, aggregate demand will: stay the same because there have been no changes to the underlying assets. Increase. Be unpredictable. Decrease

Answer 1

If stock prices go up and people feel richer, aggregate demand will increase.

What is the wealth effect?

The wealth effect is an economic theory which postulates that consumer spending increases when consumers perceive that their is an increase in the value of their assets(wealth). Consumer spending increases even if there is no increase in income.

So when the stock prices increases, aggregate demnand would increase.

To learn more about the wealth effect, please check: brainly.com/question/26960365

Answer 2

If stock prices go up and people feel richer, the aggregate demand will increase with the corresponding increase in the price level.

What do you mean by Price Level?

Price Level refers to an average of current prices across the goods and services that are produced in the economy. Price levels refer to one of the most economic indicators in the world.

Aggregate demand will increase when the stock prices go up. Aggregate demand should increase when the components of the aggregate demand that including consumer spending, investment spending, government spending, and spending will rise.

Therefore, the aggregate demand will increase when the stock prices go up and people feel richer.

Learn more about Price levels here:

brainly.com/question/13139803

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