The relationship in the economy between consumption and income is called _____
A) disposable income.
B) the consumption function.
C) the marginal propensity to consume.
D) the marginal propensity to save.
E) net wealth.

Question

Quizplus · Accepted Answer

The relationship between consumption and income is captured by the consumption function, which shows how much households consume at different income levels. The other options listed are related concepts, but they do not refer specifically to the relationship between consumption and income. Disposable income refers to the income that households have after taxes and transfers. The marginal propensity to consume (MPC) is the fraction of each additional dollar of income that is spent on consumption. The marginal propensity to save (MPS) is the fraction of each additional dollar of income that is saved rather than spent. Net wealth refers to the value of assets minus liabilities.

The Relationship in the Economy Between Consumption and Income Is