The average price of a share of stock on the New York Stock Exchange falls by 30 percent. Other things being equal, we would expect
A)an increase in the marginal propensity to consume.
B)a decrease in the marginal propensity to consume.
C)a shift up of the consumption function.
D)a shift down of the consumption function.

Question

Quizplus · Accepted Answer

A fall in stock prices typically reduces household wealth, leading to a decrease in consumption, which shifts the consumption function down.

The Average Price of a Share of Stock on the New