Suppose autonomous consumption increases. This increase in autonomous consumption will cause which of the following to occur?
A) The consumption function shifts up.
B) The consumption function shifts down.
C) The consumption function becomes steeper.
D) The consumption function becomes less steep.

Question

Quizplus · Accepted Answer

An increase in autonomous consumption means that at any level of income, consumers will spend more. This results in the consumption function shifting up (or to the right). This can be shown graphically as a movement along the 45 degree line (representing total income) and shifting the consumption function upwards.

Suppose Autonomous Consumption Increases