We Should Expect the Consumption Function to Shift Downward If

question 210

Multiple Choice

We should expect the consumption function to shift downward if

• A)real interest rates rise.
• B)price levels fall.
• C)consumers become more optimistic about future incomes.
• D)consumers become more pessimistic about future incomes.

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Definitions:

Real Incomes

Income of individuals or nations adjusted for inflation, reflecting the purchasing power of the income.

Nominal Interest Payments

The amounts paid by borrowers to lenders as the cost of borrowing money, not adjusted for inflation.

Interest Payments

Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.

Real Values

Economic measures that are adjusted for inflation, reflecting the actual buying power of money or assets.