Which of the following components has a negative or indirect relationship with consumption?
A) Expected future income
B) Real income
C) Wealth
D) Interest rates

Question

Quizplus · Accepted Answer

Interest rates have an inverse relationship with consumption. When interest rates increase, borrowing becomes expensive, which reduces consumption. On the other hand, when interest rates decrease, borrowing becomes cheaper, leading to an increase in consumption. Expected future income, real income, and wealth have a positive or direct relationship with consumption.

Which of the Following Components Has a Negative or Indirect