Read the following statements carefully:
Statement 1: A consumption function describes the relationship between consumption and savings.
Statement 2: Consumption function consists of two components—autonomous consumption and induced consumption.
Read the following statements carefully:
Statement 1: A consumption function describes the relationship between consumption and savings.
Statement 2: Consumption function consists of two components—autonomous consumption and induced consumption.
Show Hint
- Statement 1 is true and Statement 2 is false.
- Statement 1 is false and Statement 2 is true.
- Both Statements 1 and 2 are true.
- Both Statements 1 and 2 are false.
The Correct Option is B
Solution and Explanation
Statement 1 is false because the consumption function describes the relationship between consumption and income, not savings.
Statement 2 is true because the consumption function has two components: autonomous consumption (independent of income) and induced consumption (dependent on income).
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