Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)
A) recession.
B) wealth effect of an increase in stock market prices.
C) increase in income tax rates.
D) increase in saving.

Question

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)
A) recession. 
B) wealth effect of an increase in stock market prices. 
C) increase in income tax rates. 
D) increase in saving.

Quizplus · Accepted Answer

A shift of the consumption schedule from C1 to C2 would imply an increase in consumption at each level of income. This could be caused by a wealth effect due to an increase in stock market prices, as individuals feel wealthier and more confident in their ability to spend. The other options listed do not directly relate to a shift in the consumption schedule.

Refer to the Given Graph