The consumption function can shift because of changes in _____ and in _____.
A)expected income; wealth
B)expected income; wealth.
C)expected income; the marginal propensity to consume.
D)expected income; the marginal propensity to consume
E)the marginal propensity to consume; wealth.
F)the marginal propensity to consume; wealth
G)the marginal propensity to save; wealth
H)the marginal propensity to save; wealth.

Question

Quizplus · Accepted Answer

Changes in expected income and wealth can both affect the consumption function. As people expect to have more income in the future, they may increase their current consumption, shifting the function upwards. Similarly, if people feel wealthier (e.g. due to an increase in asset values or inheritance), they may also increase their consumption, shifting the function upwards. Therefore, choice B is the best option as it includes both expected income and wealth.

The Consumption Function Can Shift Because of Changes in _____