Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.Refer to the data below.Suppose the consumption is increased by $2 billion in each of the three economies.This change could have been caused by:
A)a decrease in consumer wealth.
B)expectations of higher future income.
C)an increase in taxation.
D)an increase in saving.

Question

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.Refer to the data below.Suppose the consumption is increased by $2 billion in each of the three economies.This change could have been caused by: 
A)a decrease in consumer wealth. 
B)expectations of higher future income. 
C)an increase in taxation. 
D)an increase in saving.

Quizplus · Accepted Answer

An increase in consumption expenditures in all three closed economies cannot be caused by a decrease in consumer wealth or an increase in taxation, as both of these factors would decrease consumption. Similarly, an increase in saving would also decrease consumption, so it cannot be the cause of the increase. The most likely explanation is an expectation of higher future income, which would make consumers more willing to spend now.

Following Is Consumption Schedules for Three Private Closed Economies