What influence does confidence have on savings and borrowing behavior?

The influence of confidence on savings and borrowing behavior is significant, particularly when considering option C, which states that a lack of confidence can lead to increased savings. When consumers feel uncertain about the future, whether due to economic instability, job security concerns, or other factors, they tend to prioritize saving over spending. This increased caution leads individuals to build financial buffers—savings accounts or emergency funds—so they are better prepared for unforeseen circumstances.

In contrast, during periods of high confidence, individuals are generally more willing to spend and invest, which can decrease their savings. This understanding highlights the psychological aspects of economic behavior, illustrating how perceptions of stability and security directly impact financial decision-making.

Confidence indeed plays a role in various financial choices, including borrowing and investment; however, its specific effect on savings behavior, especially in the context of uncertainty, showcases how consumer psychology can influence economic activity.