The consumption function
A) illustrates the relationship between real disposable income and real consumption spending
B) illustrates the relationship between the price level and real consumption spending
C) is the relationship between productivity and real consumption spending
D) shows how real consumption increases when real disposable income decreases
E) illustrates the relationship between real consumption spending and employment

Question

Quizplus · Accepted Answer

The consumption function shows how changes in real disposable income affect real consumption spending. It is commonly represented as C = a + b(Yd), where C is consumption spending, Yd is real disposable income, a is autonomous consumption, and b is the marginal propensity to consume.

The Consumption Function