We should expect the consumption function to shift downward if
A)real interest rates rise.
B)price levels fall.
C)consumers become more optimistic about future incomes.
D)consumers become more pessimistic about future incomes.

Question

Quizplus · Accepted Answer

If consumers become more pessimistic about future incomes, they will lower their spending and increase savings, causing the consumption function to shift downward. Real interest rates rising and price levels falling may also affect consumption, but the question asks for the specific scenario that would cause the consumption function to shift downward, and only D fits that criteria.

We Should Expect the Consumption Function to Shift Downward If