________ shifts the consumption function upward.
A) A decrease in the marginal propensity to consume
B) An increase in the real interest rate
C) An increase in expected future disposable income
D) An increase in disposable income
E) An increase in the price level

Question

Quizplus · Accepted Answer

An increase in expected future disposable income implies that consumers expect to have more money in the future, which would increase their willingness to spend now. This would shift the consumption function upward. A decrease in the marginal propensity to consume would actually shift the consumption function downward, as consumers would save more of their disposable income. An increase in the real interest rate would lead to a decrease in consumption spending, as borrowing becomes more expensive. An increase in disposable income would simply cause a movement along the consumption function. An increase in the price level would decrease the real value of consumers' disposable income, leading to a decrease in consumption spending, rather than an upward shift in the consumption function.

________ Shifts the Consumption Function Upward