The consumption function shows that when disposable income increases by one dollar, consumption expenditure
A) increases by one dollar.
B) increases by more than a dollar.
C) increases by less than a dollar.
D) does not change.
E) decreases by less than a dollar.

Question

Quizplus · Accepted Answer

The consumption function shows a positive but less than one relationship between changes in disposable income and changes in consumption expenditure. Therefore, when disposable income increases by one dollar, consumption expenditure will increase by less than one dollar.

The Consumption Function Shows That When Disposable Income Increases by One