A sustained and significant appreciation in national stock market indices and household equity portfolios is most likely to lead to which of the following changes in household consumption and saving behavior?
An increase in the household savings ratio as consumers seek to accumulate further financial assets.
A decrease in the household savings ratio driven by a positive wealth effect.
A downward shift of the aggregate consumption function due to increased precautionary saving.
A contraction in consumer spending as households divert disposable income to purchase shares.
40 exam-style questions on Edexcel A A Level Economics 2.2.2 Consumption (C). Each one has a worked solution and a mark scheme showing where the marks go.