Suppose your expectations of long-run income decreases, this will most likely
A)decrease your consumption function.
B)increase your consumption function.
C)increase your short-run debt.
D)decrease your short-run debt.

Question

Quizplus · Accepted Answer

If your expectations of long-run income decrease, you may feel less confident about your future ability to earn and save, leading you to reduce your current consumption level. Therefore, your consumption function is most likely to decrease. Increasing short-run debt may not be a reasonable response as it may worsen the already existing problem by increasing the financial burden in the future.

Suppose Your Expectations of Long-Run Income Decreases, This Will Most