If the morning paper reports that Americans,for the sixth month in a row,tend to spend more money and save less,these events would be depicted in an income expenditures model as
A) causing the 45-degree line to slope upward.
B) a downward shift in the supply function.
C) an upward shift in the consumption function.
D) an upward shift in the investment function.
E) a right to left movement along the consumption function.

Question

Quizplus · Accepted Answer

An upward shift in the consumption function would indicate that Americans are spending more at each level of income, which is consistent with the news report. This would be shown graphically as a shift to the right of the consumption function, keeping the 45-degree line unchanged. None of the other options accurately reflect this situation.

If the Morning Paper Reports That Americans,for the Sixth Month