In a simple model of the economy,without government or taxes,a shock that causes an upward shift of the aggregate consumption function also causes ________ shift of the saving function.
A)an equal upward
B)a less-than-equal upward
C)an equal downward
D)a less-than-equal downward
E)no

Question

Quizplus · Accepted Answer

This is because consumption and saving are two sides of the same coin. An upward shift in the consumption function implies that households are willing to spend more at any given level of income, which means that they are saving less. Therefore, the saving function would shift downward to reflect this change in behavior.

In a Simple Model of the Economy,without Government or Taxes,a