Suppose real GDP increases by $1 billion and, as a result, consumption increases by $500 million. This change in consumption is
A)unplanned.
B)induced.
C)autonomous.
D)too little.
E)planned.

Question

Quizplus · Accepted Answer

The increase in consumption is a direct result of the increase in real GDP, which is deemed as induced consumption. Autonomous consumption, in contrast, is independent of changes in real GDP. Unplanned or too little consumption changes suggest that consumption has not reacted to GDP as expected, which is not the case in this scenario. Finally, planned consumption isn't mentioned here, as it isn't a recognized category in this taxonomy.

Suppose Real GDP Increases by $1 Billion And, as a Result