Final answer:
True, a decrease in consumption spending is likely to reduce the growth rate of GDP, since consumption is a major component of GDP and its decline can lower economic output.
Step-by-step explanation:
If individuals decrease their consumption spending, then this is likely to reduce the growth rate of GDP, all else the same. This statement is true. Consumption is a major component of GDP, accounting for personal expenditures on goods and services. When consumption spending declines, total economic output, or GDP, tends to decrease as well, assuming no other component of GDP changes to offset this decrease.
For example, if a negative report on consumer confidence makes consumers feel pessimistic about the future, they may choose to save more and spend less. This reduction in consumption would likely shift the aggregate demand (AD) curve to the left, resulting in lower GDP and a potential slowdown in economic growth.
Additionally, policy measures such as a tax increase on consumer income can also cause consumption to fall, which can either address inflation by reducing demand or negatively impact economic growth by reducing consumption-driven GDP expansion.