Headline Effect

DEFINITION of 'Headline Effect'

The effect that negative news in the popular press has on a corporation or an economy. Whether it is justified or not, the investing public's reaction to various headlines can be very dramatic. Many economists believe that negative news headlines make consumers more reluctant to spend money.

BREAKING DOWN 'Headline Effect'

An example of a headline effect is the media's extensive coverage of the impact of rising gas prices on consumers. Some economists believe that the more attention that is paid to small increases in the price of gasoline, the more likely it is that consumers will be more cautious about spending their discretionary dollars. The headline effect can be regarded as the difference between rationally justifiable decreases in discretionary spending and those that occur as the result of a newsworthy event.

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  3. How do changes in interest rates affect the spending habits in the economy?

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  4. What's the difference between the substitution effect and the income effect?

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