How does depression typically affect consumer spending behavior?

Depression generally leads to an increased sense of uncertainty among consumers regarding their financial futures. This uncertainty can make individuals more cautious about their spending habits. As a result, many consumers tend to prioritize saving over spending, which impacts their purchasing behavior. They may avoid unnecessary expenses and instead focus on building a financial cushion, which can contribute to reduced overall consumer spending in the economy.

This cautious approach stems from a desire to mitigate perceived risks, which can include fears of job loss or decreased income. Economic downturns often heighten awareness of financial instability, prompting individuals to cut back on discretionary spending and prioritize essential needs. Consequently, the behavior of saving due to uncertainty becomes a common response during periods of depression, aligning with this choice as the correct answer.