When income rises, total expenditures remain constant.

Question

Quizplus · Accepted Answer

This statement is not always true. As income rises, individuals may choose to increase their expenditures on certain goods and services, such as luxury items or travel, leading to an increase in total expenditures. This is known as the income effect. However, it is also possible for total expenditures to remain constant or even decrease with an increase in income, depending on individual preferences and budget constraints.

When Income Rises, Total Expenditures Remain Constant