Widespread fear of a recession is likely to have which effect on aggregate demand?

Widespread fear of a recession typically leads consumers and businesses to adopt a more cautious approach to spending and investment. When fears about the economy's future arise, consumers might reduce their consumption, leading to a decrease in overall demand for goods and services. This is because uncertainty about future employment, income levels, and overall economic stability tends to make people prioritize saving over spending. As businesses observe the reduction in consumer confidence and spending, they may also cut back on their investments, further contributing to a reduction in aggregate demand.

Therefore, the correct response highlights that widespread fear of a recession would likely decrease aggregate demand due to the impacted behaviors of consumers and businesses, aiming for financial security during uncertain times.