A decline in disposable income
A) increases consumption by moving upward along a speciﬁc consumption schedule.
B) decreases consumption because it shifts the consumption schedule downward.
C) decreases consumption by moving downward along a speciﬁc consumption schedule.
D) increases consumption because it shifts the consumption schedule upward.

Question

Quizplus · Accepted Answer

Disposable income refers to the amount of income individuals have left after paying taxes and other necessary expenses. A decline in disposable income means individuals have less money to spend on consumption. As a result, they will have to move downward along their specific consumption schedule, reducing their consumption. Therefore, option C is the correct answer.

A Decline in Disposable Income