A change in consumption caused by a change in disposable income is shown by:
A) a movement along the consumption function.
B) a rightward shift of the consumption function.
C) a change in the slope of the consumption function.
D) a leftward shift of the consumption function.
E) the point where the consumption function touches the 45 degree line.

Question

Quizplus · Accepted Answer

A change in consumption caused by a change in disposable income is reflected in a movement along the consumption function. In other words, a change in disposable income leads to a movement up or down the vertical axis of the consumption function, which shows the relationship between disposable income and consumption. A shift in the consumption function would require a change in some other factor influencing consumption, such as changes in prices, expectations, or government policies. A change in the slope of the consumption function would suggest a change in the marginal propensity to consume, which is not necessarily tied to changes in disposable income. The point where the consumption function touches the 45-degree line represents the level of income at which consumption equals income and saving is zero, but it does not necessarily imply a change in consumption due to changes in disposable income.

A Change in Consumption Caused by a Change in Disposable