Refer to the following figure when answering the following questions.
Figure 16.5: U.S. Household Net Worth
-Based on Figure 16.5, consumption ________ between roughly 2004 and 2007, which was likely due
To ________.
A) rose; a rise in precautionary savings
B) fell; worries about inflation
C) fell; a decline in interest rates
D) rose; the rise in wealth
E) was unchanged; consumption smoothing

Question

Refer to the following figure when answering the following questions.
Figure 16.5: U.S. Household Net Worth 
-Based on Figure 16.5, consumption ________ between roughly 2004 and 2007, which was likely due
To ________.
A) rose; a rise in precautionary savings 
B) fell; worries about inflation 
C) fell; a decline in interest rates 
D) rose; the rise in wealth 
E) was unchanged; consumption smoothing

Quizplus · Accepted Answer

Consumption typically rises with an increase in wealth because people feel more financially secure and are willing to spend more.

Refer to the Following Figure When Answering the Following Questions