As real disposable income decreases, consumption expenditures

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When real disposable income decreases, consumption expenditures will likely decrease but by a smaller amount. This is because households are likely to adjust their spending patterns by reducing their purchases of luxury goods, such as vacations, entertainment, and dining out, but they will continue to spend on necessities, such as groceries and utilities. Therefore, the decrease in real disposable income will have a greater impact on discretionary spending, resulting in a smaller decline in total consumption expenditures.

As Real Disposable Income Decreases, Consumption Expenditures