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Questions and Answers

According to Keynes, which of the following equations represents the relationship between consumption and disposable income?

  • C = f(Y) (correct)
  • Y = f(C)
  • Y = C
  • C = Y
  • According to Keynes, what happens to consumption when disposable income increases?

  • Consumption decreases
  • Consumption increases (correct)
  • Cannot be determined
  • Consumption remains the same
  • 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 (correct)
  • Rate of consumption is greater than the rate of disposable income
  • Cannot be determined
  • Rate of disposable income is equal to the rate of consumption
  • What is the term used to describe a person's marginal propensity to consume according to Keynes?

    <p>Marginal propensity to consume</p> Signup and view all the answers

    According to Keynes, what does the equation C = f(Y) represent?

    <p>Consumption as a function of disposable income</p> Signup and view all the answers

    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.

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    Description

    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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