Asked by Jegam Rijal on Jul 15, 2024
Verified
A household that expects a decrease in disposable income in the future will _____.
A) increase its current consumption spending
B) decrease its current consumption spending
C) maintain its current consumption spending
D) first increase its current consumption spending and then decrease spending when income falls
E) first decrease its current consumption spending and then increase spending when income falls
Disposable Income
Households’ financial capacity for savings and expenditure after income tax obligations are met.
Consumption Spending
The total value of all goods and services consumed by households and individuals.
Household
A single person or a group of people living together in a single living accommodation, sharing meals or living space, and may operate as a single economic unit.
- Understand the correlation between price levels and consumer behavior.
Verified Answer
NP
Nicklaus PonteJul 21, 2024
Final Answer :
B
Explanation :
If a household expects a decrease in disposable income in the future, it is likely to decrease its current consumption spending in order to prepare for the expected lower income.
Learning Objectives
- Understand the correlation between price levels and consumer behavior.