Exhibit 8-8 Consumption function In Exhibit 8-8, which of the following could cause the movement from C₁ to C₂? A) higher wealth B) higher interest rates C) higher taxes D) a technological breakthrough

Question

Quizplus · Accepted Answer

Higher wealth would cause an upward shift in the consumption function, represented by the movement from C₁ to C₂. A technological breakthrough would shift the production function, not the consumption function, and higher interest rates and taxes would decrease consumption, causing a leftward shift in the consumption function.

Exhibit 8-8 Consumption Function