Question

Suppose a report on CNN says that there is an impending recession coming in the United States. As a result, Bert's family, as well as many other like minded families and individuals, reduce their spending and instead fill up their piggy banks for a potential rainy day.As a result of this behavior:a) Nothing in the economy changes as a result of people choosing to save up some money.b) The economy is actually harmed as there is a sharp decease in consumer spending.c) The economy is stimulated as individuals begin to save up money and therefore have more money to spend on goods.In macroeconomics, this result is known as:a) self-regulationb) a business cyclec) normal behaviord) piggy bank fatteninge) the paradox of thrift

Answer 1

Answer:

b) The economy is actually harmed as there is a sharp decease in consumer spending.

Explanation:

As a result of the news of a recession people will react by planning for a future that may be bleek financially.

Savings will increase, the greater the fear of recession the more people will save to cushion the impact of recession. There is the possibility of job slow down in economic activities and resultant job losses so extra cash that would have normally been spent will be saved for the rainy day