Which statement is true regarding the relationship between consumer confidence and spending behavior?

The statement regarding the relationship between consumer confidence and spending behavior identifies that higher consumer confidence generally encourages increased spending. This connection is rooted in the psychological and economic factors that influence consumer behavior.

When consumers feel confident about their financial situation and the overall economic outlook, they are more likely to spend money. This behavior is driven by optimism about future income, job security, and economic stability. Confident consumers are more inclined to make purchases, invest in larger items like homes or cars, and engage in discretionary spending, all of which stimulate the economy.

In contrast, lower consumer confidence can lead to caution and hesitancy in spending, as consumers are more likely to save money or delay non-essential purchases due to uncertainties regarding their financial future. Therefore, the belief that higher consumer confidence leads to increased spending aligns with economic principles, as it illustrates the direct influence that sentiment has on consumer behavior and broader economic activity.