What is the effect on the consumption function of a decrease in disposable income?
A)The consumption function shifts upward.
B)The consumption function shifts downward.
C)There is movement upward along the consumption function.
D)There is movement downward along the consumption function.
E)The consumption function becomes flatter.

Question

Quizplus · Accepted Answer

A decrease in disposable income would lead to a decrease in consumption spending, resulting in a downward movement along the consumption function. This is because individuals have less money available to spend on goods and services. The consumption function is not shifting as a whole, but rather it is showing a decrease in consumption for a given level of disposable income.

What Is the Effect on the Consumption Function of a Decrease