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DUAL LABOR MARKET: A proposition that our economy has two classes of workers -- (1) adult white males and (2) other. The other includes, but isn't limited to, women, blacks, hispanics, and teenagers. Based on the political and economic clout of whites and the traditional notion of men as the "bread winners" of a family, white males constitute the primary labor supply and thus get the best, highest paying jobs, with the greatest chance of advancement--like executive, physician, shop foreman, or U. S. Senator. The other groups, however, are left with secondary jobs--such as secretary, janitor, nurse, or convenience store clerk--that have very low pay and limited prospects to move up. Moreover, there tends to be little movement between these two labor markets.
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                           FINANCIAL WEALTH, AGGREGATE EXPENDITURES DETERMINANT: One of several specific aggregate expenditures determinants assumed constant when the aggregate expenditures line is constructed, and that shifts the aggregate expenditures line when it changes. An increase in financial wealth causes an increase (upward shift) of the aggregate expenditures line. A decrease in financial wealth causes a decrease (downward shift) of the aggregate expenditures line. Other notable aggregate expenditures determinants include consumer confidence, federal deficit, inflationary expectations, and exchange rates. The wealth of the economy comes in two basic forms--physical wealth and financial wealth. Financial wealth includes money, bank accounts, stock certificates, bonds, and other financial instruments that provide direct or indirect claims on physical goods. Physical wealth consists of houses, cars, buildings, land, property, equipment, furniture, appliances, and the whole array of tangible goods.The key with financial wealth is that it can be used to acquire physical wealth. In financial lingo, financial wealth tends to be liquid, it can easily flow between assets. Corporate stock, government savings bonds, and money market bank accounts can all easily flow into money. This money can then flow into, or be used to buy, corporate stock, government savings bonds, and money market bank accounts. Or, more importantly for this present discussion, this financial wealth can flow into, or be used to buy, physical wealth, including houses, cars, buildings, land, property, equipment, furniture, appliances, and the whole array of tangible goods. That is, the financial wealth can be used for aggregate expenditures, especially consumption expenditures and investment expenditures. Changes in financial wealth, as such, tend to cause consumption expenditures and investment expenditures to change in the same direction. - If the household sector and business sector have more financial wealth, then they have the ability to buy more goods.
- If the household sector and business sector have less financial wealth, then they do not have the ability to buy as many goods.
A change in the financial wealth, by changing consumption expenditures and investment expenditures, causes changes in aggregate expenditures. A boost in financial wealth increases aggregate expenditures and causes an upward shift of the aggregate expenditures line. A drop in financial wealth then decreases aggregate expenditures and causes a downward shift of the aggregate expenditures line.What It Does| Financial Wealth | 
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The exhibit to the right presents a standard Keynesian aggregate expenditures line. Like all aggregate expenditures lines, this one is constructed based on several ceteris paribus aggregate expenditures determinants, such as financial wealth. They key question is: What happens to this aggregate expenditures line if financial wealth changes?More Financial WealthSuppose, for example, that the stock market has been rising steadily for several years. This means that the value of corporate stock has risen, providing shareholders with an increase in financial wealth. These shareholders could simply hold onto their more valuable financial wealth, or they could "cash it in," using the money to purchase physical assets. The result is that this increase in financial wealth causes an increase in consumption expenditures and probably investment expenditures and subsequently an increase aggregate expenditures.To see how an increase in financial wealth affects the aggregate expenditures line, click the [More Wealth] button. The increase in financial wealth triggers an increase in aggregate expenditures, which is a upward shift of the aggregate expenditures line. Less financial WealthAlternatively, suppose that the stock market has been falling steadily for several years. This means that the value of corporate stock has fallen, causing the financial wealth of shareholders to decline. Because these shareholders now have less financial wealth, they are less able to purchase physical assets. In fact, some might be forced to sell off existing physical assets if they borrowed the funds used to purchase their corporate stock. The result is that the decrease in financial wealth causes a decrease in expenditures and probably investment expenditures and subsequently a decrease aggregate expenditures.To see how a decrease in financial wealth affects the aggregate expenditures line, click the [Less Wealth] button. The decrease in financial wealth triggers a decrease in aggregate expenditures, which is a downward shift of the aggregate expenditures line. What Does It Mean?Changes in financial wealth come about for two key reasons:- Monetary Policy: An important component of financial wealth is money. The total supply of money in the economy is controlled through monetary policy by the Federal Reserve System for the expressed purpose of addressing the problems of business-cycle instability. A key to this monetary policy control is that financial wealth affects aggregate expenditures. Expansionary monetary policy increases the money supply, which adds to financial wealth and consequently increases aggregate expenditures. Contractionary monetary policy decreases the money supply, which reduces financial wealth and consequently decreases aggregate expenditures.
- Stock Market: The stock market, and related financial markets, are the primary source of financial wealth for the economy. When stock prices rise, then the financial wealth of stock holders also increases. The result is an increase in aggregate expenditures. Alternatively, when stock prices fall, financial wealth also decreases, and so too do aggregate expenditures.
Recommended Citation:FINANCIAL WEALTH, AGGREGATE EXPENDITURES DETERMINANT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 15, 2025].
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Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club looking to buy either a birthday greeting card for your grandmother or a coffee cup commemorating yesterday. Be on the lookout for infected paper cuts.
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Woodrow Wilson's portrait adorned the $100,000 bill that was removed from circulation in 1929. Woodrow Wilson was removed from circulation in 1924.
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"The time to repair the roof is when the sun is shining." -- John F. Kennedy, 35th U. S. president
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NFA
National Futures Association
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