Question

Consumption depends positively on ______ and investment depends negatively on ______. the real interest rate; disposable income private saving; public saving public saving; private saving disposable income; the real interest rate

Answer 1

Answer:

disposable income; the real interest rate

Explanation:

The consumption function is given as

C = C₀ + C₁(Yd)

Where

C₀ = autonomous consumption

C₁ = non autonomous consumption

Yd = disposable income

From the above equation, consumption is a positive function of disposable income.

The investment function is given as

I = I₀ - I₁(r)

Where

I₀ = autonomous investment

I₁ = non autonomous investment

r = interest rate

From the above equation, it can be seen that investment is a negative function of interest rate.

I hope my answer helps you