The figure above shows three different consumption functions for a nation.
-Which of the following events could result in the consumption function shifting from CF₀ to CF₁?
A) an increase in disposable income
B) a decrease in disposable income
C) an increase in the real interest rate
D) a decrease in wealth
E) an increase in expected future income

Question

The figure above shows three different consumption functions for a nation.
-Which of the following events could result in the consumption function shifting from CF₀ to CF₁?
A) an increase in disposable income 
B) a decrease in disposable income 
C) an increase in the real interest rate 
D) a decrease in wealth 
E) an increase in expected future income

Quizplus · Accepted Answer

An increase in expected future income can lead to a shift in the consumption function as consumers may anticipate higher future earnings and thus increase their current consumption.

The Figure Above Shows Three Different Consumption Functions for a Nation