Question

Which one of the following statements is correct?

a. The macroeconomic theory, investment refers to the total flow of funds.
b. Macroeconomic theory deals with events that occurred in the past..
c. Induced consumption refers to that part of consumption spending that does not change as income changes
d. If the marginal propensity to consume is 0.9 and the income level is 200,the level of induced consumption is 180.
e. Income is the most important

Answer 1

Option c. Induced consumption refers to that part of consumption spending that does not change as income changes is the correct statement.

Step-by-step explanation:

Option c. Induced consumption refers to that part of consumption spending that does not change as income changes is the correct statement.

Induced consumption is the consumption spending that is determined by the level of income. It refers to the portion of consumption which does not change as income changes. It is a key component of aggregate demand and is influenced by factors such as household income, expectations, and wealth levels.

For example, if the marginal propensity to consume (MPC) is 0.9 and the income level is 200, the level of induced consumption would be 180. This means that out of the total income, 180 would be spent on consumption.