Our consumption spending tends to rise as the stock of liquid assets in the hands of consumers and credit availability (LO6) a) rises, rises b) falls, falls c) rises, falls d) falls, rises

Consumption spending refers to the amount of money consumers spend on goods and services. Liquid assets are assets that can be easily and quickly converted to cash, such as stocks and bonds. Credit availability refers to the ease of obtaining credit, such as loans and credit lines, from financial institutions.

When the stock of liquid assets in the hands of consumers increases, consumers will have more funds available to spend on goods and services. Moreover, when credit is readily available, consumers can borrow money to finance their consumption spending. Therefore, an increase in both liquid assets and credit availability would generally lead to an increase in consumption spending.

Now, we will examine each of the options and determine which one best represents the relationship between liquid assets, credit availability, and consumption spending. a) Rises, rises: This option suggests that an increase in both liquid assets and credit availability would lead to an increase in consumption spending. This option aligns with our analysis in Step 2. b) Falls, falls: This option suggests that a decrease in both liquid assets and credit availability would lead to a decrease in consumption spending. While this is logically correct, our focus is on the scenario in which consumption spending rises. c) Rises, falls: This option suggests that consumption spending would increase with an increase in liquid assets, but decrease with an increase in credit availability. This is not in line with our analysis in Step 2. d) Falls, rises: This option suggests that consumption spending would decrease with a decrease in liquid assets, but increase with an increase in credit availability. This scenario is not in line with our analysis in Step 2, as we are looking for conditions leading to increased consumption spending.

Based on the analysis in the previous steps, we can conclude that: The correct answer is: a) Consumption spending tends to rise, as the stock of liquid assets in the hands of consumers and credit availability rises.