Which of the following graphs shows the correct effect on the consumption function when consumers become pessimistic about the state of the economy?

A)Figure A
B)Figure B
C)Figure C
D)Figure D

Question

Which of the following graphs shows the correct effect on the consumption function when consumers become pessimistic about the state of the economy?

A)Figure A 
B)Figure B 
C)Figure C 
D)Figure D

Quizplus · Accepted Answer

In Figure C, the consumption function shifts downward, indicating a decrease in consumer spending due to pessimism about the economy. This is shown by the decrease in the intercept of the consumption function.

Which of the Following Graphs Shows the Correct Effect on the Consumption