In the Great Recession of 2007-2009, stock market values shrank, causing a reverse
A)wealth effect.
B)real-balances effect.
C)interest-rate effect.
D)expectations effect.Difficulty: 02 Medium

Question

Quizplus · Accepted Answer

The reverse wealth effect occurs when a decrease in stock market values leads to a reduction in consumer wealth, causing consumers to spend less and save more, which can further slow down the economy.

In the Great Recession of 2007-2009, Stock Market Values Shrank