Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given level of disposable income. This shift, in a neoclassical economy, will:

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In a neoclassical economy, an increase in consumer confidence leads to higher current consumption, reducing savings. This decrease in savings raises the interest rate, which in turn lowers investment.

Assume That an Increase in Consumer Confidence Raises Consumers' Expectations