This was a hypothesis by Keynes. According to these hypothesis, consumption is a function of the current level of disposable income. Consumption is directly but not proportionately related to the current level of the aggregate disposable income both in the short run and the long run. This implies that the average propensity to consume decreases as income increases. Keynes based this assumption that consumer’s reaction to change in income is not instant but gradual since change in income may not be permanent. This means that consumption over time is not only dependent on income overtime but also previous level of consumption
Dana05 answered the question on July 18, 2019 at 19:48
- Differentiate between the average and the marginal propensity to consume
(Solved)
Differentiate between the average and the marginal propensity to consume
Date posted: July 18, 2019. Answers (1)
- What are the uses of national income accounting (Solved)
What are the uses of national income accounting
Date posted: July 18, 2019. Answers (1)
- Highlight the factors that determine the size of an economy’s National Income (Solved)
Highlight the factors that determine the size of an economy’s National Income
Date posted: July 18, 2019. Answers (1)
- What are the difficulties involved in the measuring of National Income (Solved)
What are the difficulties involved in the measuring of National Income
Date posted: July 18, 2019. Answers (1)
- Define the following terms
Gross Domestic Product
Gross National Product
National Income
Personal Income
Disposable Income (Solved)
Define the following terms
Gross Domestic Product
Gross National Product
National Income
Personal Income
Disposable Income
Date posted: July 18, 2019. Answers (1)
- Identify the approaches to the measurement of national income (Solved)
Identify the approaches to the measurement of national income
Date posted: July 18, 2019. Answers (1)
- Distinguish between leakages and injections in the economy giving examples (Solved)
Distinguish between leakages and injections in the economy giving examples
Date posted: July 18, 2019. Answers (1)
- What are the limitations of macroeconomics (Solved)
What are the limitations of macroeconomics
Date posted: July 18, 2019. Answers (1)
- What is the importance of studying macroeconomics (Solved)
What is the importance of studying macroeconomics
Date posted: July 18, 2019. Answers (1)
- What are the aims of macroeconomic policies (Solved)
What are the aims of macroeconomic policies
Date posted: July 18, 2019. Answers (1)
- Define the following terms
Economic theory
Economic models
Macroeconomic models
Macroeconomics (Solved)
Define the following terms
Economic theory
Economic models
Macroeconomic models
Macroeconomics
Date posted: July 18, 2019. Answers (1)
- Differentiate between fiscal policies and monetary policies (Solved)
Differentiate between fiscal policies and monetary policies
Date posted: July 18, 2019. Answers (1)
- When is a corporate bond sold at a premium (Solved)
When is a corporate bond sold at a premium
Date posted: July 18, 2019. Answers (1)
- When is a corporate bond sold on a discount (Solved)
When is a corporate bond sold on a discount
Date posted: July 18, 2019. Answers (1)
- What are the advantages of issuing bonds over stocks(Solved)
What are the advantages of issuing bonds over stocks
Date posted: July 18, 2019. Answers (1)
- What are the uses of the yield to maturity(Solved)
What are the uses of the yield to maturity
Date posted: July 18, 2019. Answers (1)
- Differentiate between a bull market and a bear market (Solved)
Differentiate between a bull market and a bear market
Date posted: July 18, 2019. Answers (1)
- Differentiate between the nominal and the real interest rate (Solved)
Differentiate between the nominal and the real interest rate
Date posted: July 18, 2019. Answers (1)
- Explain how the yield curve changes with changes in the short term interest rates in the economy (Solved)
Explain how the yield curve changes with changes in the short term interest rates in the economy
Date posted: July 18, 2019. Answers (1)
- Describe the expectation hypothesis (Solved)
Describe the expectation hypothesis
Date posted: July 18, 2019. Answers (1)