In what direction will each of the following independent events shift the consumption function or the investment function? Explain your answers.
- 1.A sharp, sustained decrease in stock prices.
- 2.An economy-wide expectation that a recession is over and that a period sustained expansion will occur.
- 3.The marginal propensity to spend increases from 0.75 to 0.8.
- 4.Real interest rates increase.
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