Asked by Dalton Gross on Apr 27, 2024
Verified
Expectations that disposable income will increase in the future will _____.
A) shift the current consumption function upward
B) shift the current consumption function downward
C) result in an upward movement along the current consumption function
D) make the current consumption function flatter
E) make the current consumption function steeper
Disposable Income
The leftover money for households to use in savings and for buying things, once income taxes have been considered.
Consumption Function
An economic formula that represents the relationship between total consumption and gross national income, indicating how changes in income affect spending.
- Understand the impact of expectations on consumption.
Verified Answer
JZ
Jielin ZhangApr 28, 2024
Final Answer :
A
Explanation :
If disposable income is expected to increase in the future, households will be more willing to consume now, knowing that they will have more income available in the future. This will shift the current consumption function upward, indicating that at any given level of income, households will consume more.
Learning Objectives
- Understand the impact of expectations on consumption.