Macro

Income & Employment

Easy

Figure out the correct statement with respect to consumption function of an economy.

It assumes that consumption changes at a constant rate as investment changes.

The level of consumption independent of income is called autonomous consumption.

When income changes, change in consumption can exceed the change in income.

Consumer has to change necessarily the consumption level when income changes.

✅ Correct Option: 2

In the consumption function $C = \bar{C} + cY$ , the term $\bar{C}$ is consumption that does not depend on income, called autonomous consumption, so option 2 is correct. Consumption is related to income, not investment; the change in consumption cannot exceed the change in income since $0 < MPC < 1$ ; and consumers need not necessarily change consumption when income changes.

2025: 3 June Shift 2

When the marginal propensity to consume is given as $0.5$ . What is the tax multiplier?

2023: 30 May Shift 1

What will be the effect on stocks when aggregate demand decreases ?

2025: 29 May Shift 2

Suppose autonomous investment and consumption expenditure (A) in a hypothetical economy is ₹50 crores. MPS is 0.2 and the level of income is ₹4000 crores. The value of ex-ante aggregate demand would be _________

2022: 16 July Shift 2

Actual aggregate demand's gap from that needed to achieve full employment equilibrium is referred to as:

2026: 23 May Shift 1

The components of consumption function are:

2026: 6 June Shift 1

Which of the following depicts the actual meaning of marginal propensity to save (MPS)?

Figure out the correct statement with respect to consumption function of an economy.

Solution

Related questions:

Keyboard Shortcuts

CUET Economics Past Year Questions (Topic-Wise)