The consumption function is:
A)the relationship between aggregate expenditure and real GDP.
B)a plot of consumption relative to income taxes in the economy.
C)always negative in slope.
D)a plot of consumption at each level of real GDP.

Question

Quizplus · Accepted Answer

The consumption function is a plot of consumption at each level of real GDP. It shows the level of consumption expenditure that households plan to undertake at any level of income or real GDP. It is generally upward sloping, reflecting the fact that as income increases, households tend to spend more on consumption. Therefore, option D is the correct answer.

The Consumption Function Is