Even if income is zero, some consumption still takes place, which is independent of income. This type of consumption is called?
Even if income is zero, some consumption still takes place, which is independent of income. This type of consumption is called?
Solution
Option 1 -> Consumption independent of income level, occurs even at zero income.
Option 2 -> General term for consumption by households, not specific to income-independent consumption.
Option 3 -> Consumption that depends on and varies with income level.
Option 4 -> Consumption that depends on income, opposite of autonomous.
Hence, Autonomous Consumption -> This is the minimum level of consumption that occurs regardless of income. In the Keynesian consumption function C = a + bY, 'a' represents autonomous consumption (the intercept), which exists even when income (Y) is zero. People meet this through savings, borrowing, or transfers. For example, basic necessities like food and shelter must be consumed for survival even without income. In contrast, induced consumption (bY) varies directly with income changes. -> correct
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