Figure 13-3 -Refer to Figure 13-3. Suppose the consumption function is given by curve C₁. Which of the following will cause a downward shift to curve C₁? A) a stock market crash that decreases household wealth B) a decrease in price level C) an increase in withholding tax rate D) rising optimism about economic conditions

Question

Quizplus · Accepted Answer

A stock market crash that decreases household wealth would lead to a decrease in consumer confidence and a decrease in disposable income, leading to a decrease in consumption and a downward shift in the consumption function curve.

Figure 13-3 -Refer to Figure 13-3. Suppose the Consumption Function Is Given