Suppose the stock market crashed, wiping out $5 trillion of household wealth.Consistent with economic models based on historical trends, consumption spending might fall by as much as, but probably not more than:
A)$35 billion.
B)$200 billion.
C)$350 billion.
D)$2 trillion.

Question

Quizplus · Accepted Answer

Economic models suggest that consumption spending typically falls by about 3-7% of the loss in wealth. A $5 trillion loss would likely reduce consumption by around $150 billion to $350 billion, making $350 billion a reasonable upper estimate.

Suppose the Stock Market Crashed, Wiping Out $5 Trillion of Household