An increase in autonomous consumption ________.
A)lowers planned expenditures
B)raises equilibrium output for any level of the interest rate
C)causes a movement down along the IS curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

An increase in autonomous consumption shifts the consumption function upward, which results in an increase in equilibrium output for any level of the interest rate. Therefore, option B is the correct choice. Options A and C are incorrect, as they do not reflect the impact of an increase in autonomous consumption. Option D is incorrect because options A and C are incorrect. Option E is incorrect because an increase in autonomous consumption will have an impact on equilibrium output.

An Increase in Autonomous Consumption ________