Declines in the housing market in the late 2000s and the stock market crash caused total U.S.household wealth to decrease.How did this affect consumption spending?
A) Consumption spending did not change at all.
B) Consumption spending decreased about 3 percent.
C) Consumption spending decreased about 10 percent.
D) Consumption spending decreased about 30 percent.

Question

Quizplus · Accepted Answer

Consumption spending decreased as households lost wealth and therefore felt less financially secure, leading to a reduction in spending. This is consistent with the wealth effect, where changes in consumer wealth influence spending behaviors.

Declines in the Housing Market in the Late 2000s and the Stock