Consider the Impact of an Increase in Thriftiness in the Keynesian-Cross

question 93

Multiple Choice

Consider the impact of an increase in thriftiness in the Keynesian-cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption function is made smaller so that at every income level saving is greater. This will:

• A) increase saving by the decrease in the intercept.
• B) lead to no change in saving.
• C) decrease saving by the decrease in the intercept.
• D) lead to an increase in investment.