According to the consumption function,

what variables determine aggregate spending on consumer goods and services?

A. Consumer spending depends on disposable income, the real interest rate, and other variables such as consumers' optimism and wealth.

B. Consumer spending depends on disposable income, the real interest rate, and the export-to-import ratio.

C. Consumer spending depends only on disposable income and the real interest rate.

D. None of the above are correct.

Question

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Business

3 July, 13:13

According to the consumption function,

what variables determine aggregate spending on consumer goods and services?

A. Consumer spending depends on disposable income, the real interest rate, and other variables such as consumers' optimism and wealth.

B. Consumer spending depends on disposable income, the real interest rate, and the export-to-import ratio.

C. Consumer spending depends only on disposable income and the real interest rate.

D. None of the above are correct.

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Answers (1)

Know the Answer?

Kaliyah Atkins · Answer 1

The correct answer is option A.

Explanation:

Consumer spending refers to the expenditure of households on consumer goods and services. The aggregate consumer spending depends upon the disposable income of the consumer, the real interest rate, consumer optimism and wealth.

Consumer spending is positively related to disposable income, consumer optimism and wealth. The real interest rate is inversely related to consumer spending.