The consumption function shows the relationship between planned real consumption spending and
A) real disposable income.
B) planned real saving.
C) the average propensity to consume.
D) the marginal propensity to consume.

Question

Quizplus · Accepted Answer

The consumption function shows the relationship between planned real consumption spending and real disposable income. It represents how much individuals and households plan to spend on consumption goods and services at different levels of income. Real disposable income is the amount of income after taxes and inflation. Therefore, the consumption function is a positive relationship between real disposable income and planned real consumption spending. The other answer choices (B, C, and D) are related to the concept of consumption but are not directly related to the consumption function.

The Consumption Function Shows the Relationship Between Planned Real Consumption