When the Economy Enters an Expansion of a Business Cycle

question 64

Multiple Choice

When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to

• A) a shift upward of the consumption function.
• B) a movement downward along the consumption function.
• C) a movement upward along the consumption function.
• D) an increase in consumption expenditures.
• E) no change in the level of consumption expenditures.