5 Questions
According to Keynes, which of the following equations represents the relationship between consumption and disposable income?
C = f(Y)
According to Keynes, what happens to consumption when disposable income increases?
Consumption increases
According to Keynes, how does the rate of disposable income compare to the rate of consumption?
Rate of disposable income is greater than the rate of consumption
What is the term used to describe a person's marginal propensity to consume according to Keynes?
Marginal propensity to consume
According to Keynes, what does the equation C = f(Y) represent?
Consumption as a function of disposable income
Study Notes
Consumption and Disposable Income
- The relationship between consumption and disposable income is represented by the equation C = f(Y), where C is consumption and Y is disposable income.
- When disposable income increases, consumption also increases, but not by as much as the increase in disposable income.
- The rate of increase in consumption is less than the rate of increase in disposable income.
- The marginal propensity to consume is the term used to describe a person's tendency to spend more as their disposable income increases.
- The equation C = f(Y) represents the functional relationship between consumption and disposable income, showing that consumption is a function of disposable income.
Test your knowledge on the financial inclusion officer's role in the BFSI sector with this quiz on Chapter 1: Finance Life Cycle Consumption. Explore the main hypothesis proposed by Keynes and its impact on an individual's consumption level. Dive into the theory and gain a deeper understanding of this important concept in the finance industry.
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