Assume That an Increase in Consumer Confidence Raises Consumers' Expectations

question 14

Multiple Choice

Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given level of disposable income. This shift, in a neoclassical economy, will:

• A)lower investment and raise the interest rate.
• B)raise investment and lower the interest rate.
• C)lower both investment and the interest rate.
• D)raise both investment and the interest rate.

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Definitions:

Dollar Sales

The total revenue generated from the sale of goods or services, expressed in monetary units.

Contribution Margin Ratio

A financial indicator demonstrating the proportion of sales income that is not absorbed by variable expenses, hence aiding in the coverage of fixed costs.

Fixed Monthly Expenses

Costs that do not vary in the short term, regardless of business volume or activity levels, and are incurred on a monthly basis.

Net Operating Income

The profit generated from a company's everyday business operations, calculated by subtracting operating expenses from revenue.