At a fixed income level, an increase in consumption which is accompanied by a decrease in savings is reflected by
A) an upward rotation of the consumption function.
B) a downward rotation of the consumption function.
C) an upward shift of the consumption function.
D) a movement up along the consumption function.

Question

Quizplus · Accepted Answer

An increase in consumption at a fixed income level, accompanied by a decrease in savings, indicates that consumers are now willing to consume more at every level of income. This is represented by an upward shift of the consumption function, not just a movement along the existing curve or a rotation of the curve.

At a Fixed Income Level, an Increase in Consumption Which