When the real interest rate falls, there is
A)a decrease in the slope of the consumption function.
B)a movement upward along the consumption function.
C)an increase in the slope of the consumption function.
D)an upward shift of the consumption function.
E)a downward shift of the consumption function.

Question

Quizplus · Accepted Answer

When the real interest rate falls, borrowing becomes cheaper, which can lead to an increase in consumption at each level of income, causing an upward shift in the consumption function.

When the Real Interest Rate Falls, There Is