According to Keynes
A) consumption is positively related to the interest rate.
B) consumption is directly related to income but saving is inversely related to income.
C) both consumption and saving are positively related to real disposable income.
D) consumption is directly related to income but saving has no relationship with income.

Question

Quizplus · Accepted Answer

Keynesian theory suggests that as real disposable income increases, both consumption and saving increase, but the marginal propensity to consume is less than one, meaning not all additional income is spent.