Economists Atif Mian and Amir Sufi believe that the sharp decline in consumption spending in 2008 occurred because falling housing prices resulted in ________ and lower consumer borrowing to finance spending.
A) lower housing wealth
B) higher interest rates
C) lower planned investment
D) unplanned decreases in inventories

Question

Quizplus · Accepted Answer

Falling housing prices resulted in a decline in housing wealth, which reduced consumer borrowing to finance spending. Lower housing wealth means consumers have less equity in their homes, which makes it difficult for them to borrow against their homes to finance spending. As a result, consumption spending declined sharply in 2008.

Economists Atif Mian and Amir Sufi Believe That the Sharp