The consumption function shows the relationship between consumption spending and Gross national income.
What is a consumption function?
- A British economist, John Maynard Kenes introduced the consumption function.
- It is an economic formula that shows the relationship between consumption spending and Gross national income.
What is Gross national income?
- It was earlier known as the Gross national product.
- It is like an alternative to the GDP.
- It refers to the total amount of money earned by the people of a nation and the businesses.
- The formula used to calculate the GNI is represented as: GNI = C + I + G + X + NFFI
- It is important to know the GNI because the government needs to be aware about the economics of the nation in order to implement and make policies.
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