If the stock market collapses, consumption will
A) not be affected.
B) increase because stocks can now be purchased cheaply.
C) decrease because people feel that they have less money.
D) increase by a small amount.

Question

Quizplus · Accepted Answer

If the stock market collapses, people who have invested in stocks lose money, which can lead to a decrease in their overall wealth. This decrease in wealth can cause people to cut back on their spending, leading to a decrease in consumption.

If the Stock Market Collapses, Consumption Will