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

Question

Quizplus · Accepted Answer

Opportunity cost refers to the cost of giving up one option in favor of choosing another one. Therefore, the higher the opportunity cost of consumption, the more expensive it is to choose consumption over other options such as investment or saving. This would result in lower aggregate expenditures as people may choose to invest or save their money instead of consuming.

The Higher the Opportunity Cost of Consumption, The