When stock prices fall

Question

Quizplus · Accepted Answer

When stock prices fall, an individual's wealth may decrease as the value of their portfolio reduces. This, in turn, may affect their willingness to spend as they may become cautious and prefer saving the money until the stock prices rise again. Hence, option D is the correct answer as it correctly represents the impact of falling stock prices on an individual's wealth and their willingness to spend. Option A and C are incorrect as they mention that an individual's willingness to spend is not affected by falling stock prices, which is not true. Option B is also incorrect as a business firm may prefer to hold onto their stocks during a fall as selling them during a low phase may result in them receiving less than their purchased value of the stocks.

When Stock Prices Fall