Tag: determinants of consumption function and savings function

Questions Related to determinants of consumption function and savings function

The consumption function depends on _______________.

economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

  1. interest

  2. savings

  3. wealth

  4. income

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Correct Option: D
Explanation:

Consumption function refers to the standard equation of consumption which defines the relationship between consumption and income where consumption value can be derived at each level with the use of income value. 

C= c+ bY where c=autonomous consumption, b= marginal propensity to consume, and Y= income.

If income in terms of wage rate ___________, consumption expenditure __________.

economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

  1. increases, decreases

  2. increases, increases

  3. decreases, increases

  4. decreases, decreases

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Correct Option: B
Explanation:

If income in terms of wage rate increases, then consumption expenditure also increases which is called the wage-price spiral where the wages are increased due to excessive price in the economy and price in increased due to excessive wage and consumption demand in the economy.