According to Keynesian theory, the most important determinant of saving and consumption is
A) the level of real disposable income.
B) the stock of liquid assets.
C) the returns on stocks and bonds
D) the level of consumer indebtedness.

Question

Quizplus · Accepted Answer

According to Keynesian theory, the most important determinant of saving and consumption is the level of real disposable income. As income increases, people are more likely to consume more, while if income decreases, people are more likely to save more. This is because, as income increases, people feel more secure in their financial situation, which allows them to spend more money. Conversely, if income decreases, people often feel less secure, which leads them to save more and spend less.

According to Keynesian Theory, the Most Important Determinant of Saving