A once-and-for-all jump in the price level would initially cause a(n)
A)upward shift in the consumption function.
B)upward movement along the consumption function.
C)downward shift in the consumption function.
D)downward movement along the consumption function.

Question

Quizplus · Accepted Answer

A once-and-for-all jump in the price level would reduce the real value of money, leading to a decrease in consumer wealth. This decrease in wealth would cause consumers to reduce their consumption, which is represented by a downward shift in the consumption function.

A Once-And-For-All Jump in the Price Level Would Initially Cause