The Fed is concerned about stock market booms because the booms
A)increase consumption spending.
B)increase investment spending.
C)increase both consumption and investment spending.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Stock market booms can lead to both consumption and investment spending. When stock prices rise, individuals and businesses with investments in the market may feel wealthier and more confident. This can lead to increased consumer spending, as people are more willing to make purchases with their increased wealth. Additionally, businesses may also feel more confident and willing to invest in new projects and expansion, leading to increased investment spending. The Fed is concerned about these booms because they can contribute to a buildup of economic imbalances and eventually lead to a downturn or financial crisis.

The Fed Is Concerned About Stock Market Booms Because the Booms