The consumption function implies that
A)Disposable income inversely influences consumption.
B)Consumption increases as disposable income increases.
C)Autonomous consumption changes when people have low incomes.
D)None of the choices are correct.

Question

Quizplus · Accepted Answer

The consumption function states that as disposable income increases, consumption also increases. Therefore, choice B is the correct answer. Choice A is incorrect because the consumption function shows a positive relationship between disposable income and consumption, not an inverse relationship. Choice C is incorrect because autonomous consumption (the part of consumption that is not influenced by disposable income) is not affected by changes in income levels. Choice D is incorrect because there is a correct answer.

The Consumption Function Implies That