Which of the following is most likely to happen if aggregate consumption in an economy falls steeply?
A) Firm bankruptcies will rise.
B) Labor supply will fall.
C) Asset prices will rise.
D) Mortgage defaults will fall.

Question

Quizplus · Accepted Answer

If aggregate consumption falls steeply, it means that households are spending less, which can result in lower demand for goods and services. This can lead to lower revenues and profits for firms, which may struggle to pay their debts, resulting in an increase in firm bankruptcies.

Which of the Following Is Most Likely to Happen If