Tag: determinants of consumption function and savings function

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Multiple choice economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

The consumption function depends on _______________.

  1. interest

  2. savings

  3. wealth

  4. income
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Consumption function refers to the standard equation of consumption which defines the relationship between consumption and income where consumption value can be derived at each level with the use of income value. 

C= c+ bY where c=autonomous consumption, b= marginal propensity to consume, and Y= income.

Multiple choice economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

If income in terms of wage rate ___________, consumption expenditure __________.

  1. increases, decreases

  2. increases, increases

  3. decreases, increases

  4. decreases, decreases
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If income in terms of wage rate increases, then consumption expenditure also increases which is called the wage-price spiral where the wages are increased due to excessive price in the economy and price in increased due to excessive wage and consumption demand in the economy.