Other things being constant, what will be the effect of each of the following on consumption and saving schedules? (a) Concern grows over rising prices

Answer a. Concern grows over rising prices this means that consumers feel that in future prices of goods and services will rise. As a result they will increase their present consumption. This will cause an upward Movement in consumption function and a downward Movement in supply function.

Answer b. When real interest rate Falls benefit of saving decreases and consumer avoid saving money. When there is fall in interest rate makes consumer borrow more money this will increase his consumption. As a result consumption will go up and savings will fall down.