Question

Which of the following statements is true of customers and their behavior after the 2007-2009 downturn of the economy?

A. They started spending money more impulsively on things they desired.
B. They preferred top-of-the line products to discounted products.
C. They opted to acquire more financial obligation in the face of possible risk.
D. They adopted a ""cautious spending"" approach toward their finances.

Answer 1

After the 2007-2009 economic downturn, consumers generally adopted a cautious spending approach due to uncertainty about their economic future and a significant decline in the stock market, which led to higher savings rates and less consumption. Therefore, the correct option is D.

Step-by-step explanation:

The economic downturn of 2007-2009 led to significant changes in consumer behavior. One of the most noteworthy aspects of this shift was the tendency for consumers to adopt a cautious spending approach. Given the financial uncertainty during and after the recession, many individuals faced concerns about job security and their future income, which negatively influenced their consumption patterns. During the Great Recession, as people felt far greater uncertainty about their economic future and witnessed their wealth decline due to a sharp drop in the stock market, they began to save more and reduce their spending. This increase in savings rates and decline in consumption were natural responses to the financial risks perceived during this turbulent period. Furthermore, without access to credit, consumer spending continued to decline, spurring a deeper focus on financial prudence.

In contrast to discretionary spending, areas such as higher education saw an increase in spending as consumers worldwide sought ways to improve future economic prospects, believing that advanced skills and degrees could lead to higher earnings and job security.