A decline in consumer confidence will lead to

	a) an upward shift in the consumption function and higher current consumption.
	b) a downward shift in the consumption function and lower current consumption.
	c) a downward shift in the saving function and lower current saving.
	d) a downward shift in the saving function and a higher interest rate.

Expert Solution

A decline in consumer confidence will lead to a downward shift in consumption function and lower current consumption.

Consumer confidence measures the degree of optimism that consumers have regarding their financial situation and overall state of a country 's economy.Of consumer confidence declines , consumers become less certain about about their financial situation and they will spend less therefore the current consumption decline and consumption function will shift downward .

So option (b) is correct.

Rahul Sunny answered 2 years ago

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