Consider the following news headline: "Increase in consumer confidence leads to increase in spending".Which of the following correctly describes the likely effect in our simple macro model?
A)the consumption function shifts downward
B)the consumption function gets flatter
C)the AE function shifts upward
D)the consumption function shifts upward
E)both C and D are correct

Question

Quizplus · Accepted Answer

An increase in consumer confidence typically leads to an increase in spending, which would shift the consumption function upward and also shift the aggregate expenditure (AE) function upward.

Consider the Following News Headline: "Increase in Consumer Confidence Leads