The consumption function shows how much
A) households plan to consume per year at each level of real disposable income.
B) households plan to consume per year at each possible interest rate.
C) real disposable income people will earn at each income tax bracket.
D) households plan to consume per year at each level of savings.

Question

Quizplus · Accepted Answer

The consumption function is used by economists to represent the relationship between real disposable income and household consumption. It shows the level of consumption that households plan to undertake at each level of income. This helps to predict how changes in income levels will affect consumption patterns.

The Consumption Function Shows How Much