The following graphs show an economy's initial position at point A along its consumption function (C). Suppose there is an increase in the interest rate households are paid on money they save. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in the interest rate. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) ? REAL CONSUMPTION (Billions of dollars) A
The following graphs show an economy's initial position at point A along its consumption function (C). Suppose there is an increase in the interest rate households are paid on money they save. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in the interest rate. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) ? REAL CONSUMPTION (Billions of dollars) A
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Just for information the point can move left and right and the line can move up and down. When line moves up the point can move to the left only and when the line moves down, the point can move to the right only. I hope that makes sense to you.
Transcribed Image Text:The following graphs show an economy's initial position at point A along its consumption function (C).
Suppose there is an increase in the interest rate households are paid on money they save.
On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in the interest rate.
(Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)
(?
REAL CONSUMPTION (Billions of dollars)
с
REAL DISPOSABLE INCOME (Billions of dollars)
с
O
A
Transcribed Image Text:Now suppose that disposable income suddenly and unexpectedly decreases.
On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of a fall in disposable
income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)
REAL CONSUMPTION (Billions of dollars)
с
REAL DISPOSABLE INCOME (Billions of dollars)
O
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