Macroeconomics 11th Edition by Michael Parkin

Exercise 14

Use the following news clip to work Problem.
Americans $2.4 trillion Poorer
The Federal Reserve reported that household wealth decreased by $2.4 trillion or $21,000 per household in the third quarter of 2011. This drop is the steepest since 2008 and the second consecutive quarterly drop. Foreclosures lowered household debt slightly but credit card debt increased. Many households are struggling to buy the essentials and spending on food has decreased. Separately, the Bureau of Economic Analysis reported that consumption expenditure increased by $39 billion in the third quarter of 2011.
Explain and draw a graph to illustrate how a fall in household wealth would be expected to influence the consumption function and saving function.