Which of the following will reduce consumer expenditures?
A)a decrease in interest rates
B)a general increase in housing prices
C)a decrease in expected future income
D)a decrease in the price level
E)an increase in interest rates

Question

Quizplus · Accepted Answer

A decrease in expected future income will reduce consumers' willingness and ability to spend money, thereby reducing consumer expenditures. A decrease in interest rates or a decrease in the price level may actually increase consumer expenditures by making it easier and cheaper to borrow money or by increasing consumers' purchasing power. An increase in interest rates will likely also reduce consumer expenditures, but that option is not listed. A general increase in housing prices may not have a significant impact on consumer expenditures because it depends on whether consumers are buying or selling homes.

Which of the Following Will Reduce Consumer Expenditures