Figure 13-3 -Refer to Figure 13-3. Upward Shifts of the Consumption Function

question 16

Multiple Choice

Figure 13-3
-Refer to Figure 13-3. Upward shifts of the consumption function, for example from C₀ to C₁ to C₂ demonstrate

• A) an increase in the marginal propensity to save.
• B) increases in the amount of consumption for a given level of disposable income.
• C) increases in the amount of disposable income available for consumption.
• D) an increase in the marginal propensity to save

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Definitions:

Phillips Curve

An economic theory suggesting an inverse relationship between the rate of inflation and the rate of unemployment in an economy.

Long-Run Phillips Curves

A graphical representation showing that in the long run, there is no trade-off between inflation and unemployment.

Natural Rate

The level of economic activity or output at which the economy operates without causing inflation to accelerate, often associated with unemployment or interest rates.

Inflation Expectations

The rate at which people expect prices to increase over a period, influencing their economic behavior.