Expectations that disposable income will increase in the future will
A)shift the current consumption function up
B)shift the current consumption function down
C)result in a movement upward along the current consumption function
D)make the current consumption function flatter
E)make the current consumption function steeper

Question

Quizplus · Accepted Answer

If expectations of an increase in disposable income in the future arise, there will be a higher inclination towards consumption which will be reflected by a shift in the current consumption function upwards. This is because consumers tend to increase their consumption at their current disposable income level, anticipating a future increase in their income.

Expectations That Disposable Income Will Increase in the Future Will