Recall the Application About the Impact That Home Equity Values

Multiple Choice

Recall the Application about the impact that home equity values have on consumer spending and wealth to answer the following question(s) . From 1997 to mid-2006, housing prices rose nationally by approximately 90 percent and consumer wealth increased by $6.5 trillion, but in the summer of 2006, housing prices began to fall. Home equity is the single largest component of net wealth for most families in the United States, and changes in the value of home equity affect consumer spending.
-According to this Application, home equity is the single largest component of net wealth for most families in the United States. As home equity falls

A) autonomous consumption will decrease, shifting the consumption function downward.
B) autonomous consumption will decrease, shifting the consumption function upward.
C) the MPC will decrease, increasing the slope of the consumption function.
D) the MPC will decrease, decreasing the slope of the consumption function.