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

Question

Quizplus · Accepted Answer

An increase in expected future disposable income increases the propensity to consume, leading to a higher consumption expenditure. This results in a shift of the consumption function upward.

An Increase in Expected Future Disposable Income ________ Consumption Expenditure