Which of the following behaviors is more likely to occur during a bad economy?

• A. Consumers reduce discretionary spending
• B. Households take on more luxury debt
• C. Government decreases unemployment benefits
• D. Businesses increase hiring rapidly

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the context of a bad economy, which typically involves lower income, higher unemployment, and increased economic uncertainty for consumers and businesses.
2. Step 2: Analyze consumer behavior during economic downturns. Consumers tend to become more cautious and prioritize essential spending over discretionary or luxury items.
3. Step 3: Evaluate the options given: reducing discretionary spending aligns with cautious consumer behavior, while taking on more luxury debt is unlikely due to financial insecurity.
4. Step 4: Consider government actions during a bad economy. Governments usually increase or maintain unemployment benefits to support those out of work, rather than decreasing them.
5. Step 5: Assess business behavior. In a bad economy, businesses are more likely to reduce hiring or lay off workers rather than increase hiring rapidly.