Suppose autonomous consumption decreases. This reduction in autonomous consumption will cause which of the following to occur?
A)The consumption function shifts down.
B)The consumption function shifts up.
C)The consumption function becomes steeper.
D)The consumption function becomes less steep.

Question

Quizplus · Accepted Answer

Autonomous consumption is represented as a constant term in the consumption function. If autonomous consumption decreases, then the overall consumption for any given level of income will be lower. This will lead to a downward shift in the consumption function.

Suppose Autonomous Consumption Decreases