The Keynesian model is based on the idea that
A) saving depends only on the interest rate.
B) both consumption and saving are positively related to real disposable income.
C) consumption is unrelated to the level of real Gross Domestic Product (GDP).
D) both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).

Question

Quizplus · Accepted Answer

The Keynesian model states that both consumption and saving are positively related to real disposable income. This means that as real disposable income increases, both consumption and saving will increase as well. This is known as the consumption function, which is a key component of the Keynesian model. Option A is incorrect because saving is influenced by other factors as well, such as income and expectations of future income. Option C and D are also incorrect because they do not align with the basic principles of the Keynesian model.

The Keynesian Model Is Based on the Idea That