Which of the following events would shift a household’s consumption function upwards? Select one: a. The...

Which of the following events would shift a household’s consumption function upwards?

Select one:

a. The rate of interest falls.

b. Household current wealth falls as the stock market declines.

c. The rate of interest rises.

d. The household gets new information that leads them to expect they will be laid off next year.

e. The household head decides to go back to school

Expert Solution

Answer is “The rate of interest falls”

As the rate of interest falls in the general economy, the interest sensitive consumer spending rises pushing the consumption function in Income Expenditure model Upward.

Rahul Sunny answered 2 years ago

Consumption function will shift down if

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