Which of the following would unambiguously increase consumption spending?
A) an increase in real disposable income coupled with a decrease in real wealth
B) an increase in real wealth coupled with more pessimistic expectations regarding future income
C) a decrease in real disposable income coupled with a decrease in the interest rate
D) a decrease in the interest rate coupled with an increase in real wealth
E) increased pessimism regarding future income coupled with an increase in the interest rate

Question

Quizplus · Accepted Answer

A decrease in the interest rate will lower borrowing costs and make it cheaper for consumers to finance their purchases. This will encourage spending, particularly if combined with an increase in real wealth, as consumers will have more income and assets available to support their consumption. Therefore, choice D is the best option, as it combines both factors that would increase consumption spending. The other choices either involve conflicting effects or negative influences on consumption.

Which of the Following Would Unambiguously Increase Consumption Spending