An increase in disposable income:
A) Increases consumption because it shifts the consumption schedule upward
B) Decreases consumption because it shifts the consumption schedule downward
C) Increases consumption by moving upward along a given consumption schedule
D) Decreases consumption by moving downward along a given consumption schedule

Question

Quizplus · Accepted Answer

An increase in disposable income leads to an increase in consumption, but it does not shift the consumption schedule. Instead, it causes a movement along a given consumption schedule, which means that the level of consumption increases for each level of income. As such, choice C is the best answer.

An Increase in Disposable Income