Someone recently asked me whether it was rude to use an expensive vodka bottle and fill it with a cheaper brand, to “keep up appearances.”
I think this gets the Oscar for Most Ridiculous Question I've been asked.
First of all, you could pour the drinks in the kitchen with no one the wiser; or better yet, not worry about serving inexpensive vodka—it's your home.
The bigger issue is that it's not always easy to be straightforward about a change in your financial circumstances—especially when it might impact how you socialize. Still, a part of good etiquette is being honest, and I advocate telling good friends the truth. If you fall off the social radar with no explanation, some may think it's a reflection on their company. It's better to say, “Dan and I are going to have to give up our Friday night dinners out, but maybe we could turn it into a movie night instead?”
Or, for the sake of privacy, don't explain: simply suggest cheaper get-togethers—free museum days, babysitting swaps, etc.
In this economy, most people will take the hint, and I bet they'll be grateful for your graciousness (and frugality). If you get the sense from a pal that a swanky restaurant meal—or expensive booze—means more than your friendship, then they're the ones who should examine their manners.