According to the simple Keynesian model,if disposable income rises,
A) the marginal propensity to consume rises
B) savings falls
C) consumption increases
D) the expenditure multiplier rises
E) all of the above

Question

Quizplus · Accepted Answer

According to the simple Keynesian model, an increase in disposable income leads to an increase in consumption. Therefore, choice C is the correct answer. Choices A and D may or may not be true depending on the specific values of the marginal propensity to consume and the expenditure multiplier. Choice B may be true if the increase in disposable income is not fully spent on consumption, but is saved instead.

According to the Simple Keynesian Model,if Disposable Income Rises