A rise in the stock market makes consumers more willing to spend, then the aggregate demand curve shifts right.
Consumers typically spend more when they are more optimistic about the direction of the economy. Businesses tend to spend more on investments when there is a high level of business confidence because they think the return on their investment will be significant in the future. In contrast, when consumer or business confidence wanes, expenditure on consumption and investments falls.
The components of aggregate demand—consumption spending, investment expenditure, government spending, and spending on exports minus imports—increasingly move to the right, causing a shift in the aggregate demand curve. As these components decrease, the AD curve will turn back to the left.
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