The relationship between consumption and disposable income is such that
A) an inverse and stable relationship exists between consumption and income.
B) a direct, but very volatile, relationship exists between consumption and income.
C) a direct and relatively stable relationship exists between consumption and income.
D) the two are usually equal.

Question

Quizplus · Accepted Answer

The answer is C because there is generally a direct and relatively stable relationship between consumption and disposable income. As disposable income increases, so does consumption, but not at a one-to-one ratio, due to saving and other factors. This relationship is not usually equal, as there are often other factors that affect consumption aside from income.

The Relationship Between Consumption and Disposable Income Is Such That