According to economists, how does an increase in the inflation rate affect the consumption function?
A)It shifts the function upward.
B)It shifts the function downward.
C)It causes movement upward along the function.
D)It causes movement downward along the function.
E)It has no predictable effect on the function.

Question

Quizplus · Accepted Answer

An increase in the inflation rate typically reduces the real purchasing power of consumers, leading to a decrease in consumption at each income level, which shifts the consumption function downward.

According to Economists, How Does an Increase in the Inflation