The decrease in lifetime wealth affects consumption demand by
A) -MPC(G2 - G1).
B) MPC(G2 - G1).
C) r(G2 - G1).
D) (1 - MPC)(G2 - G1).
E) does not affect it.

Name: The decrease in lifetime wealth affects consumption demand by A) -MPC(G2 - G1). B) MPC(G2 - G1). C) r(G2 - G1). D) (1 - MPC)(G2 - G1). E) does not affect it.
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Question

Quizplus · Accepted Answer

The decrease in lifetime wealth reduces consumption demand by MPC(G2 - G1), where MPC is the marginal propensity to consume and (G2 - G1) is the change in lifetime wealth.

The Decrease in Lifetime Wealth Affects Consumption Demand by