Since 1968, U.S. consumption function has generally shifted because of _.
A) downward; higher real interest rates
B) upward; higher real interest rates
C) downward; falling wealth
D) upward; higher expected future income and rising wealth

Question

Quizplus · Accepted Answer

The consumption function is a relationship between disposable income and consumption. Since 1968, the U.S. consumption function has generally shifted upward because of higher expected future income and rising wealth. This means that people are more willing to spend and consume at every level of income. Higher real interest rates, falling wealth, and a downward shift in the consumption function would result in a decrease in consumer spending at every level of income.