When consumers cut back on spending what falls?

Question

Quizplus · Accepted Answer

When consumers cut back on spending, the velocity of money falls. This refers to the rate at which money is exchanged in an economy, and a decline in velocity means that money is changing hands less frequently, which can have a negative impact on economic growth. The money supply and interest rates may not necessarily fall in this scenario, and tax rates are determined by government policy rather than individual consumer behavior.

When Consumers Cut Back on Spending What Falls