The Keynesian consumption function exhibits all of the following properties except that:

Question

Quizplus · Accepted Answer

The Keynesian consumption function suggests that consumption is a function of disposable income. It is said to have a marginal propensity to consume between zero and one, meaning that as income increases, consumption increases but at a decreasing rate. This is referred to as the average propensity to consume decreasing as income increases. The main determinants of consumption are disposable income, interest rates, and household wealth. These determinants can be influenced by changes in economic policies, both expected and unexpected, and not just unexpected policy changes. Therefore, choice C is incorrect.

The Keynesian Consumption Function Exhibits All of the Following Properties