An increase in household saving causes consumption to
A)rise and aggregate demand to increase.
B)rise and aggregate demand to decrease.
C)fall and aggregate demand to increase.
D)fall and aggregate demand to decrease.

Question

Quizplus · Accepted Answer

An increase in household saving means that households are spending less money on consumption. This leads to a decrease in consumption and, as a result, a decrease in aggregate demand, since consumption is a major component of aggregate demand.

An Increase in Household Saving Causes Consumption to