Why does an increase in the price level tend to cause the consumption function to shift downward?
A)An increase in the price level decreases disposable income.
B)An increase in the price level increases the demand for fixed money assets.
C)An increase in the price level decreases the value of fixed money assets.
D)An increase in the price level decreases saving and increases debt.

Question

Quizplus · Accepted Answer

An increase in the price level decreases the real value of fixed money assets, reducing consumers' wealth and thus their consumption, causing the consumption function to shift downward.

Why Does an Increase in the Price Level Tend to Cause