If consumers expect prices to rise and shortages to occur in the future, then there will be a shift:
A) Upward of both the consumption and saving schedules
B) Downward of both the consumption and saving schedules
C) Of the consumption schedule upward and of the saving schedule downward
D) Of the consumption schedule downward and the saving schedule upward

Question

Quizplus · Accepted Answer

If consumers expect prices to rise and shortages to occur in the future, they will likely increase their spending now to avoid paying higher prices later. This will cause an upward shift in the consumption schedule. At the same time, they may also decrease their saving because they may perceive the value of their money to decrease in the future due to inflation. This will cause a downward shift in the saving schedule. Therefore, the answer is C.

If Consumers Expect Prices to Rise and Shortages to Occur