An increase in household wealth that creates a wealth effect would shift the:
A) Consumption schedule and the saving schedule upward
B) Consumption schedule and the saving schedule downward
C) Consumption schedule upward and the saving schedule downward
D) Consumption schedule downward and the saving schedule upward

Question

Quizplus · Accepted Answer

An increase in household wealth creates a wealth effect that makes people feel wealthier and more confident about their financial situation. Therefore, they are likely to spend more money and save less, leading to an upward shift in the consumption schedule and a downward shift in the saving schedule. Choice C reflects this relationship, with an upward shift in the consumption schedule and a downward shift in the saving schedule.

An Increase in Household Wealth That Creates a Wealth Effect