Suppose current income increases for consumers, but there is no change in expected future income. Describe...

Suppose current income increases for consumers, but there is no change in expected future income. Describe and illustrate the impact on current consumption, future consumption, and savings. If any of these effects are indeterminate, explain why.

Expert Solution

ANS: As per given situation as the current income increases but there is no change in the expected future income. So as per this suppose as if the current income increases then current consumption and saving both increases but as if there is no change in the future consumption them there is decrease in the current consumption and saving decreases

But as if the future income is not expected as some uncertainties are also happens in nearby future as no one knows so for that a person starts thinking about it that to save the current income that helps in the future and also to be beneficial to save the money . Therefore , the current consumption decreases, saving increases and the future consumption increases only if there are no uncertainties being possible in the future.

Rahul Sunny answered 2 years ago

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