If disposable income is held constant,aggregate consumption expenditure will increase in all but which of the following cases?
A) The public's wealth holdings increase.
B) The rate of interest increases.
C) The public anticipates price increases in the future.
D) The public currently has an abnormally low stock of durable goods.
E) The population increases.

Question

Quizplus · Accepted Answer

An increase in the rate of interest will increase the cost of borrowing, leading to a decrease in consumption expenditure and an increase in savings. Therefore, aggregate consumption expenditure will not increase in this case. In all other cases, aggregate consumption expenditure will increase. An increase in wealth increases the ability to spend, anticipation of future price increases encourages current consumption, a low stock of durable goods necessitates consumption, and an increase in population leads to higher demand for goods and services.

If Disposable Income Is Held Constant,aggregate Consumption Expenditure Will Increase