Consumers and businesses with debt overhang are likely to _____ their borrowing and _____ their spending.
A)increase; decrease
B)increase; increase
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

When consumers and businesses have debt overhang, they are likely to decrease their borrowing to reduce their debts. This reduction in borrowing reduces their ability to spend, thereby decreasing their spending as well. So, overall, the correct answer is option C - decrease their borrowing and decrease their spending.

Consumers and Businesses with Debt Overhang Are Likely to _____