AP Macroeconomics - National Income and Price Determination

Shifts: Changes in expected future disposable income and aggregate wealth can shift the consumption function.

• Expected Future Disposable Income: An increase in expected future disposable income typically leads to an increase in current consumption, shifting the consumption function upward. Conversely, a decrease leads to a downward shift.

• Aggregate Wealth: Higher aggregate wealth (e.g., increased stock market values or real estate values) tends to increase consumer spending, shifting the consumption function upward. Lower aggregate wealth leads