In the Keynesian model, consumption
A) is positively related to the interest rate but negatively related to a temporary change in income.
B) is positively related to income but saving is not systematically related to either income or interest rates.
C) and saving are negatively related to the real interest rate.
D) and saving are positively related to income.

Question

Quizplus · Accepted Answer

In the Keynesian model, consumption and saving are both positively related to income. As income increases, individuals have more disposable income and, therefore, consume more and save more. Saving is not systematically related to the interest rate in this model.

In the Keynesian Model, Consumption