An increase in expected future disposable income ________ consumption expenditure and ________.
A)increases;results in a movement upward along the consumption function
B)decreases;shifts the consumption function upward
C)decreases;shifts the consumption function downward
D)increases;shifts the consumption function upward
E)increases;shifts the consumption function downward

Question

Quizplus · Accepted Answer

An increase in expected future disposable income would lead to an increase in consumption expenditure. This would result in a shift upward of the consumption function as opposed to a movement along it. Shifts along the consumption function occur when there is a change in current disposable income or other factors influencing consumption such as interest rates or wealth.

An Increase in Expected Future Disposable Income ________ Consumption Expenditure