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 quite stable relationship exists between consumption and income.
D)the two are always equal.

Question

Quizplus · Accepted Answer

According to the consumption function, as disposable income increases, consumption also increases, but at a decreasing rate. This means that there is a direct relationship between consumption and income, but it is not a one-to-one relationship. Rather, it is a stable and predictable relationship where consumption increases at a slower rate than income. Therefore, choice C is the correct answer.

The Relationship Between Consumption and Disposable Income Is Such That