The figure given below shows the consumption functions of an economy.?Figure 9.4

-Refer to Figure 9.4. The shift of the consumption function from C₁ to C₂ has caused autonomous saving to:
A) decrease by the distance between H and B.
B) increase by the distance between C and B.
C) decrease by the distance between C and B.
D) increase by the distance between H and G.
E) decrease by the distance between D and E.

Question

The figure given below shows the consumption functions of an economy.?Figure 9.4
 
-Refer to Figure 9.4. The shift of the consumption function from C₁ to C₂ has caused autonomous saving to:
A) decrease by the distance between H and B. 
B) increase by the distance between C and B. 
C) decrease by the distance between C and B. 
D) increase by the distance between H and G. 
E) decrease by the distance between D and E.

Quizplus · Accepted Answer

Autonomous saving is the amount of savings that households plan to undertake at a given level of income, regardless of the level of consumption. The shift of the consumption function from C₁ to C₂ means that at any given level of income, consumption will be higher than before. This implies that households will plan to save less than before, leading to a decrease in autonomous saving by the distance between C and B.

The Figure Given Below Shows the Consumption Functions of an Economy.?Figure