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) no change in the level of consumption expenditures.
D) an increase in consumption expenditures.
E) a movement upward along the consumption function.
A
You might also like to view...
In the foreign exchange market, the supply curve for dollars slopes upwards because
A) as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. B) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. C) as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. D) supply curves always slope upwards.
An increase in the real interest rate occurs when ________
A) monetary policy responds automatically to an increase in inflation B) expected inflation increases, relative to the nominal interest rate C) an increase in autonomous spending causes an increase in equilibrium output D) all of the above E) none of the above