Final answer:
The correct answer is C. The true statement about the economic recession's impact on consumer mindset is that consumers adopt a 'cutting back' mentality, marked by increased savings and decreased consumption due to uncertainty about their economic future.
Step-by-step explanation:
The true statement regarding the impact of economic recession on consumers' mindset is that consumers have shifted to a "cutting back" mentality. During a recession, news of economic downturns and financial struggles pushes consumers to become more cautious with their spending, contrary to being optimistic about future economic conditions or spending more freely. The economic challenges prompt a rise in savings rates and a decline in consumption as individuals seek financial security during uncertain times.
Expected future income significantly influences consumer behavior. If the outlook is negative, consumers tighten their belts and reduce their spending, which affects overall aggregate demand. Wealth and credit conditions further influence this behavior. For example, when the U.S. stock market declined by roughly 40% from March 2008 to March 2009, the uncertainty spiked, prompting increased savings and reduced consumption. In contrast to this, positive economic indicators can lead to increased borrowing and spending based on the perceived increase in wealth.