Statement I.As consumption rises,induced consumption becomes a larger proportion of consumption.
Statement II.When disposable income is zero,induced consumption is zero.

Question

Quizplus · Accepted Answer

Statement I is true because as consumption rises, people are more likely to spend a larger proportion of their income on goods and services that they want, rather than on necessities. Statement II is also true because when disposable income is zero, people have no money left to spend on consumption, so induced consumption must be zero.