When the real interest rate falls, there is
A) an increase in the slope of the consumption function.
B) an upward shift of the consumption function.
C) a downward shift of the consumption function.
D) a decrease in the slope of the consumption function.
E) a movement upward along the consumption function.

Question

Quizplus · Accepted Answer

When the real interest rate falls, borrowing becomes cheaper, encouraging more consumption at each level of income, leading to an upward shift in the consumption function.

When the Real Interest Rate Falls, There Is