A decrease in autonomous consumption ________.
A)raises planned expenditures
B)lowers equilibrium output for any level of the interest rate
C)shifts the IS curve to the right
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Autonomous consumption refers to the portion of consumption that is not affected by changes in income or other economic factors. Decrease in autonomous consumption would shift the consumption function downward, resulting in lower equilibrium output for any level of the interest rate. This is represented by a leftward shift in the aggregate demand curve or the IS curve. It does not raise planned expenditures or shift the IS curve to the right.

A Decrease in Autonomous Consumption ________