The Consumption Function Shows

question 28

Multiple Choice

The consumption function shows

• A) a positive relationship between an individual's stock of wealth and his level of planned consumption.
• B) a positive relationship between disposable income and planned consumption.
• C) a negative relationship between planned consumption and aggregate saving.
• D) a negative relationship between disposable income and planned consumption.

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Definitions:

Constant-Growth DDM

A version of the dividend discount model that assumes dividends grow at a constant rate indefinitely.

Dividend

Funds disbursed by a corporation to its owners, often from the company's profits, as a profit sharing.

Expected Growth Rate

The predicted percentage increase in the value of an investment, asset, or economy over a certain period of time.

Required Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.