The Consumption Function Relates

question 416

Multiple Choice

The consumption function relates

• A)a household's consumption to its wealth.
• B)planned household consumption to real disposable income.
• C)planned household consumption and real interest rates.
• D)real disposable incomes earned by households with the level of consumption credit desired in the economy.

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Definitions:

Precautionary Motive

The desire to hold liquid assets as a safeguard against unforeseen emergencies or as a precaution against future financial uncertainties.

Speculative Motive

The intent to hold cash or assets in anticipation of future price changes to make a profit.

Money Supply

The aggregate money supply in an economy at a particular time, covering cash, coins, and deposits in checking and savings accounts.

Demand Deposits

Bank accounts from which deposited funds can be withdrawn at any time without any advance notice to the bank.