The consumption function shows the relationship between
A) planned consumption expenditures and disposable income.
B) permanent income and savings.
C) business inventory and real GDP.
D) aggregate demand and aggregate consumption.

Question

Quizplus · Accepted Answer

The consumption function shows the relationship between planned consumption expenditures (how much people plan to spend on goods and services) and disposable income (how much money people have available to spend after taxes and other obligations are taken into account). It is usually expressed as a mathematical equation, such as C = a + bY, where C is consumption, a is a constant, b is the marginal propensity to consume, and Y is disposable income.

The Consumption Function Shows the Relationship Between