The five most important variables that determine the level of consumption are
A)disposable income,wealth,expected future income,price level,and interest rate.
B)wealth,savings account balances,checking account balances,stock portfolio balances,and bond portfolio balances.
C)government purchases,interest rates,income,taxes,and transfers.
D)government purchases,saving account balances,wealth,interest rates,portfolio balances.

Question

Quizplus · Accepted Answer

Disposable income is the primary determinant of consumption levels as people's ability to consume is determined by their income after taxes. Wealth also impacts consumption as people with greater wealth can afford to spend more. Expected future income influences consumption decisions as people may adjust their current consumption levels based on their expectations of future income. Price level affects consumption as higher prices reduce the amount consumers can buy with their income. Interest rates affect consumption decisions as changes in interest rates can affect the cost of borrowing for consumers. Therefore, choice A includes the most relevant variables in determining consumption levels.

The Five Most Important Variables That Determine the Level of Consumption