Katy101
The loss of confidence among consumers that led to a sudden reduction in consumption and investment spending, causing both dramatic drops in demand and credit, and disruption of trade, ultimately resulting
Here, we can't use that because we don't know whether the subject is confidence or consumers, right?
Not correct. "that" is neither referring to
confidence nor to
consumers; "that" is referring to "
loss of confidence", because this is what
makes sense!
Also it is worthy to note that "that" cannot modify "consumers"; if the intent was to modify "consumers", the correct relative pronoun should have been "who".
Do remember that there is considerable
flexibility in terms of what "that" can modify.
p.s. Our book
EducationAisle Sentence Correction Nirvana discusses
modifier issues of "that", their application and examples in significant detail. If you or someone is interested, PM me your email-id; I can mail the corresponding section.