Question

Question 9 (1 point) The consumption functions shows a Question 9 options: negative relationship between consumption and disposable income positive relationship between consumption and disposable income positive relationship between consumption and price level. positive relationship between consumption and saving

Answer 1

Answer:

positive relationship between consumption and disposable income

Explanation:

The consumption function shows the relationship between consumer spending and disposable income.

the formula used to calculate consumption function is:

C = A + MY

• C = consumer spending
• A = autonomous spending
• M = MPC or marginal propensity to consume
• Y = disposable income

The consumption function has a upward slope since the relationship between consumer spending and disposable income is always positive, i.e. the more disposable income you have, the more you will consume.