Other things constant, an increase in households' willingness to save more at every level of income will cause:
A) the consumption function to become flatter because the MPC rises.
B) the consumption function to make a downward parallel shift.
C) the consumption function to remain stationary but the saving function to shift upward.
D) the consumption function to become steeper because the MPC declines.

Question

Quizplus · Accepted Answer

An increase in households' willingness to save more at every level of income means that for any given level of income, households will choose to consume less and save more. This behavior results in a downward shift of the consumption function, as households are now consuming less at each income level.

Other Things Constant, an Increase in Households' Willingness to Save