In an effort to balance the budget, the government cuts spending rather than increasing taxes.What will happen to the consumption schedule?
A)It will become steeper.
B)It will become flatter.
C)It will shift upward.
D)It will shift downward.
E)It will remain the same and move along it.

Question

Quizplus · Accepted Answer

When the government cuts spending to balance the budget, it reduces the overall demand in the economy. This leads to a decrease in income and, consequently, a decrease in consumption. Therefore, the consumption schedule will shift downward, reflecting lower levels of consumption at each level of income.

In an Effort to Balance the Budget, the Government Cuts