The lower the opportunity cost of consumption, the:
A)lower the investment in the economy.
B)lower the consumption.
C)higher the aggregate expenditures.
D)more to the left the economy is along the IS curve.

Question

Quizplus · Accepted Answer

When the opportunity cost of consumption is low, individuals are willing to spend more and, therefore, aggregate expenditures will be higher. Conversely, when the opportunity cost of consumption is high, individuals are more likely to save or invest their money, resulting in lower aggregate expenditures. This relationship can be seen on the IS curve, where higher aggregate expenditures result in a shift to the right, not the left. Option A is incorrect as a lower opportunity cost of consumption would incentivize investment, not decrease it. Option B is also incorrect, as a lower opportunity cost of consumption would encourage more consumption, not less.

The Lower the Opportunity Cost of Consumption, The