In the aggregate expenditures model, the consumption schedule is shown to be:
A) Directly related to real interest rates
B) Inversely related to real interest rates
C) Directly related to real income GDP
D) Inversely related to real income GDP

Question

Quizplus · Accepted Answer

The consumption schedule is directly related to real income GDP. As income increases, consumers are able to spend more, leading to a higher level of consumption expenditures. This relationship is captured in the consumption function, which shows the relationship between disposable income (which is directly related to real income GDP) and consumption.

In the Aggregate Expenditures Model, the Consumption Schedule Is Shown