An upward shift in the consumption function
A) results if people decide they want to save more.
B) has the same kind of multiplier effect as an increase in investment.
C) occurs if people's incomes rise.
D) raises the average propensity to save.
E) raises the marginal propensity to consume.

Question

Quizplus · Accepted Answer

An upward shift in the consumption function indicates that at each level of income, consumption is higher than before. This is similar to the effect of an increase in investment, as both can stimulate economic activity through the multiplier effect, leading to increased output, income, and further consumption. Choices A, C, D, and E do not accurately describe the effects of an upward shift in the consumption function.

An Upward Shift in the Consumption Function