Question

How does an improvement in consumer confidence affect the consumption function and the aggregate demand curve?

Answer 1

If the consumers are further confident they will expend additional dollars at entirely earnings stage and the consumption function moves upward. This increase in expenditure reasons the aggregate demand curve to move to the right. The ceteris paribus is known as a alteration in interest rates reasons a movement alongside the investment demand curve.

Answer 2

If the consumers are more confident, they will spend more at entirely earnings stage, therefore, making  consumption function goes up. This increase in expenditure causes the aggregate demand curve to move to the right. The ceteris paribus is known as an alteration in interest rates causes a movement alongside the investment demand curve.