A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

Question

Quizplus · Accepted Answer

When employees are laid off, their disposable income decreases. This leads to a decrease in their consumption expenditures, which will shift their consumption functions downward. As a result, they will consume less than before, and their overall spending in the economy will decrease.

A Major Employer in a Small Town Announces Upcoming Major