Which of the Following Conjectures That Underlie the Keynesian Consumption

question 60

Multiple Choice

Which of the following conjectures that underlie the Keynesian consumption function is not consistent with aggregate U.S. data?

• A) The marginal propensity to consume is between 0 and 1.
• B) The average propensity to consume decreases as income increases.
• C) There is a high correlation between income and consumption.
• D) Current income is a determinant of consumption.

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Definitions:

Long-Run Equilibrium

A state in which economic forces such as supply and demand are balanced over the long term, with all factors of production and markets adjusting fully to any changes.

Long-Run Cost Curve

A graphical representation that shows the minimum cost at which different quantities of output can be produced in the long run, highlighting economies and diseconomies of scale.

Industry Supply Curve

A graphical representation showing the relationship between the price of a good and the total output supplied by all firms in the industry.

Production Function

A mathematical model that describes the relationship between the quantities of productive inputs used and the amount of output produced.