Question

The most important determinant of a household's consumption spending is A) its disposable income. B) the government transfers received by the household. C) the level of education of the members of the household. (Select the most appropriate option.)

Answer 1

The primary determinant of household consumption spending is its disposable income, which directly impacts how much a household can spend on goods and services.

Step-by-step explanation:

The most important determinant of a household's consumption spending is A) its disposable income. This is primarily because disposable income represents the amount of money that a household has available after taxes, which they can either spend or save. In fact, consumption expenditure by households, which includes spending on durable goods, nondurable goods, and services, is the largest component of GDP, signifying the critical role of consumer spending in driving the economy. Economist John Maynard Keynes also underscored the prominent role of disposable income in affecting consumption levels.