Asked by Anamari Kolak on Jul 15, 2024
Verified
Expectations that the price level will decrease in the future will _____.
A) make the current consumption function flatter
B) shift the current consumption function downward
C) result in an upward movement along the current consumption function
D) result in a downward movement along the current consumption function
E) make the current consumption function steeper
Consumption Function
An economic formula that depicts the relationship between total consumption and gross national income, indicating how income affects spending.
Future Expectations
Anticipations or predictions about the economy or financial markets based on current events or trends that can influence consumer and investor behaviors.
- Explain how anticipations of future price trends influence consumer spending.
Verified Answer
ZR
Zohaib RehmanJul 18, 2024
Final Answer :
B
Explanation :
Expectations of future price decreases lead consumers to delay purchases, anticipating lower prices ahead. This behavior effectively reduces current consumption at all income levels, shifting the current consumption function downward.
Learning Objectives
- Explain how anticipations of future price trends influence consumer spending.