Which of the following is likely to shift the consumption schedule downwards? (1) Expectations of a fall in interest rates (2) Consumer prices are expected to fall (3) Currently less stock of durable good in the possession of consumers (4) The expectation of a future rise in the consumer price index

Which of the following is likely to shift the consumption schedule downwards?
(1) Expectations of a fall in interest rates
(2) Consumer prices are expected to fall
(3) Currently less stock of durable good in the possession of consumers
(4) The expectation of a future rise in the consumer price index

Answer

• (1) Expectations of a fall in interest rates
  Explanation:
  The consumption schedule shifts downward when less is being consumed out of the given income. Lower interest rates allow people to borrow money cheaply, hence they can spend and invest more. Expectations of a fall in interest rates will stimulate a decrease in spending so as to save for the future period when borrowing will be cheaper.