Question

John Maynard Keynes believed that the average propensity to consume:

a. was constant.
b. increased as income increased.
c. decreased as income increased.
d. was less than the marginal propensity to consume.

Answer 1

Answer: Option (c) is correct.

Step-by-step explanation:

Average propensity to consume refers to the fraction of income that is spent on consumption. It is determined by dividing the consumption level of an individual by income.

Average propensity to consume (APC) =
`(Consumption(C))/(Income(Y))`

Hence, as the income of an individual increases, as a result average propensity to consume falls because the denominator part of an equation become more larger than the numerator part.