The figure given below shows the consumption functions of an economy. Figure 9.4 Refer to Figure 9.4.Which of the following could explain a downward shift of the consumption function from C₁ to C₃? A)An increase in household wealth B)A decrease in the proportion of young people in the population C)An increase in the size of the population D)A decrease in consumer confidence E)An autonomous decrease in saving

Question

Quizplus · Accepted Answer

A decrease in consumer confidence would lead to a decrease in consumption at each level of disposable income, resulting in a downward shift of the consumption function. An increase in household wealth would shift the consumption function upward, a decrease in the proportion of young people in the population or an increase in the size of the population would not necessarily affect the consumption function, and an autonomous decrease in saving would shift the consumption function downward at every level of disposable income.

The Figure Given Below Shows the Consumption Functions of an Economy