-In the above figure, if the interest rate is negatively related to household expenditures for any given level of household income, an increase in the interest rate will
A) shift the line vertically upward.
B) shift the line vertically downward.
C) make the line negatively sloped.
D) cause no change in the line's position.

Question

-In the above figure, if the interest rate is negatively related to household expenditures for any given level of household income, an increase in the interest rate will
A) shift the line vertically upward. 
B) shift the line vertically downward. 
C) make the line negatively sloped. 
D) cause no change in the line's position.

Quizplus · Accepted Answer

An increase in the interest rate, if negatively related to household expenditures, would reduce household expenditures for any given level of income, effectively shifting the expenditure line downward. This is because higher interest rates typically discourage borrowing and spending, leading to a decrease in household expenditures.

-In the Above Figure, If the Interest Rate Is Negatively