In Germany, expected future income increased during 2014. This increase led to
A) a downward shift of the consumption function.
B) no movement along the consumption function and no shift of the consumption function.
C) a movement upward along the consumption function.
D) a movement downward along the consumption function.
E) an upward shift of the consumption function.

Question

Quizplus · Accepted Answer

An increase in expected future income typically leads to an increase in current consumption as individuals anticipate higher income and thus are more willing to spend in the present. This is represented by an upward shift of the consumption function, not just a movement along it.

In Germany, Expected Future Income Increased During 2014