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Question 9 (1 point) The consumption functions shows a Question 9 options: negative relationship between consumption and disposable income positive relationship between consumption and disposable income positive relationship between consumption and price level. positive relationship between consumption and saving

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Answer:

positive relationship between consumption and disposable income

Explanation:

The consumption function shows the relationship between consumer spending and disposable income.

the formula used to calculate consumption function is:

C = A + MY

  • C = consumer spending
  • A = autonomous spending
  • M = MPC or marginal propensity to consume
  • Y = disposable income

The consumption function has a upward slope since the relationship between consumer spending and disposable income is always positive, i.e. the more disposable income you have, the more you will consume.

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