The graph of the consumption function has consumption expenditure on the vertical axis and
A) the interest rate on the horizontal axis.
B) the Consumer Price Index on the horizontal axis.
C) disposable income on the horizontal axis.
D) time on the horizontal axis.

Question

Quizplus · Accepted Answer

The consumption function shows the relationship between disposable income and consumption expenditure. Therefore, disposable income is typically put on the horizontal axis of the graph. The other options, such as the interest rate or consumer price index, may have an influence on consumption but are not direct determinants of it, making them less appropriate for the horizontal axis of the consumption function graph. Time is also not an appropriate choice because the consumption function relates variables at a point in time, rather than across time periods.

The Graph of the Consumption Function Has Consumption Expenditure on the Vertical