A stock market crash that causes stock prices to fall should cause
A)a decrease in consumption spending.
B)an increase in consumption spending.
C)an increase in wealth.
D)no change in consumption spending.
E)an increase in interest rates.

Question

Quizplus · Accepted Answer

A stock market crash usually leads to a decrease in consumer confidence and wealth, which in turn reduces consumption spending. This is because consumers are more uncertain about the future and may be hesitant to spend money, leading to a decrease in aggregate demand.

A Stock Market Crash That Causes Stock Prices to Fall