The Keynesian model is based on the idea that
A)saving depends only on the interest rate.
B)both consumption and saving are directly related to disposable income.
C)consumption is unrelated to the level of real Gross Domestic Product (GDP).
D)both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).

Question

Quizplus · Accepted Answer

The Keynesian model states that both consumption and saving are directly related to disposable income. This means that as disposable income increases, both consumption and saving will increase. Therefore, option B is the correct answer. Option A is incorrect because saving is not solely dependent on the interest rate in the Keynesian model. Options C and D are also incorrect because consumption and saving are both affected by the level of real GDP in the Keynesian model.

The Keynesian Model Is Based on the Idea That