The decrease in consumer spending during the 2008-2009 recession was due in part to falling prices in the stock market.The reason for the decline in consumer spending is most closely related to which of the following variables that determine the level of consumption?
A)the interest rate
B)current disposable income
C)household wealth
D)the price level
E)government transfers

Question

Quizplus · Accepted Answer

Household wealth is closely related to the level of consumption, as consumers tend to spend more when they feel financially secure and have higher levels of wealth. The falling prices in the stock market resulted in decreased household wealth, which likely led to a decrease in consumer spending. The other options (A, B, D, and E) may also impact consumption, but are less directly related to the decrease in consumer spending during the recession.

The Decrease in Consumer Spending During the 2008-2009 Recession Was