Question

Suppose that due to a fear that the United States is about to enter a long period of stagnant growth, stock prices fall by 50% on average. Predict what would happen to spending by consumers.

Answer 1

spending would increase

Step-by-step explanation:

Disposable income is either saved (invested) or spent.

If stock prices are expected to fall, individuals would be less willing to save their income and would prefer to spend their income instead.

As a result, spending would increase