Which of the following would lead you to predict an upward shift in the consumption function?
A)a decrease in the value of real wealth
B)a decrease in disposable income
C)an increase in the value of real wealth
D)an increase in the price level

Question

Which of the following would lead you to predict an upward shift in the consumption function?
A)a decrease in the value of real wealth 
B)a decrease in disposable income 
C)an increase in the value of real wealth 
D)an increase in the price level

Quizplus · Accepted Answer

An increase in the value of real wealth will lead to a higher consumption function since people feel wealthier and are more likely to spend. Conversely, a decrease in the value of real wealth (choice A) would likely lead to a decrease in the consumption function. A decrease in disposable income (choice B) would also lead to a decrease in the consumption function since people have less money to spend. An increase in the price level (choice D) would lead to a decrease in the purchasing power of consumer's incomes, and thus a decrease in the consumption function.

Which of the Following Would Lead You to Predict an Upward