One of the effects of a change in disposable income could not be a(n)
A)movement up along the consumption function.
B)movement down along the consumption function.
C)change in the amount of consumption expenditures.
D)upward shift of the consumption function.

Question

Quizplus · Accepted Answer

A change in disposable income can lead to an upward or downward shift of the consumption function, depending on the magnitude of the change and the slope of the consumption function. Movement along the consumption function occurs only when there is a change in the independent variable (income, in this case) while other factors affecting consumption remain constant. Therefore, A and B are not the correct choices. A change in disposable income will always result in a change in the level of consumption expenditures, so C is not a valid choice.

One of the Effects of a Change in Disposable Income