Question

Keynesian relationship between income and consumption is termed as:

• A. Consumption
• B. Consumption expenditure
• C. The consumption function
• D. The production function

Hint:

The consumption function shows how consumption varies with income, forming the basis of Keynesian aggregate demand.

Answer 1

The Correct Option is C

The Keynesian consumption function explains the relationship between disposable income and consumption expenditure. It describes how much households plan to consume at various income levels. Keynes argued that as income increases, consumption also increases but at a decreasing rate. This relationship is foundational to understanding aggregate demand in Keynesian economics.