One reason why consumption expenditure is less volatile than GDP is that
A) personal disposable income is more volatile than GDP.
B) personal disposable income is less volatile than GDP.
C) the progressive income tax structure of the United States is too weak to generate higher and lower collections during booms and recessions, respectively.
D) retained corporate earnings increase during recessions because firms use the slow times to retool for the next upturn.
E) none of the above because the statement is false.

Question

Quizplus · Accepted Answer

Personal disposable income tends to be less volatile than GDP because mechanisms like progressive taxation and social welfare programs help to stabilize individuals' income, making their consumption patterns less susceptible to economic fluctuations compared to the overall GDP.

One Reason Why Consumption Expenditure Is Less Volatile Than GDP