When the real interest rate falls,the consumption function
A)shifts upward.
B)shifts downward.
C)does not shift and there is no movement along the consumption function.
D)does not shift and there is a movement downward along the consumption function.
E)does not shift and there is a movement upward along the consumption function.

Question

Quizplus · Accepted Answer

When the real interest rate falls, it becomes cheaper for consumers to borrow money, which increases their disposable income and allows them to spend more on goods and services. This leads to an upward shift in the consumption function.

When the Real Interest Rate Falls,the Consumption Function