The consumption function shows
A) a positive relationship between an individual's stock of wealth and his level of planned consumption.
B) a positive relationship between disposable income and planned consumption.
C) a negative relationship between planned consumption and aggregate saving.
D) a negative relationship between disposable income and planned consumption.

Question

Quizplus · Accepted Answer

The consumption function shows a positive relationship between disposable income and planned consumption. As disposable income increases, individuals tend to increase their consumption spending. The other options presented are incorrect because they either show a relationship that is opposite to what is described by the consumption function or a relationship that is not included in the function.

The Consumption Function Shows