Final answer:
When households experience an increase in wealth, they tend to increase private saving and increase consumption spending.
Step-by-step explanation:
When households experience an increase in wealth, they tend to increase private saving and increase consumption spending.
Increased wealth allows households to save more, as they have more discretionary income available. However, households also tend to increase their consumption spending, as they feel more financially secure and have the means to purchase more goods and services.
To illustrate this, let's say a household receives a significant increase in wealth, such as a large inheritance. Instead of spending all the new wealth, the household may decide to save a portion of it for future financial goals, such as retirement or emergencies. At the same time, they may also choose to increase their consumption spending by buying a new car or going on a vacation.