Question

Which of the following is true concerning the relationship between MPC and consumption function
a) the larger the MPC,higher the level of autonomous consumption b) larger the MPC ,steeper the consumption function c) larger the MPC,larger the MPS
d) smaller the MPC,steeper the consumption function ​

Answer 1

The marginal propensity to consume has a value that is less than one, according to Keynes' theory, which is stated by the following formula:

Marginal Propensity to Consume(MPC) <1.

This is how MPC and consumption function are related to one another. Consumers spend their marginal propensity by consuming things that represent a small portion of the total payment raise.

Why is MPC important? What is it?

This computation is crucial because MPC fluctuates depending on income level and is not a constant. Typically, as income rises, more of a person's wants and needs are met.

What is the consumption model's fundamental tenet?

The fundamental tenet of the consumption model is that consumer consumption forecasts will be more precise than retailer-placed supplier demand forecasts.

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