Question

________ consumption is consumption that depends upon the level of GDP and ________ consumption is consumption that does not depend upon the level of GDP.

Answer 1

C. Induced; Autonomous

Step-by-step explanation:

Induced Consumption

This is the type of consumption that is dependent on disposable income. It varies along with disposable income. This implies that as disposable income rises, induced consumption also rises and vice versa. An increase in disposable income signifies an increase in demand leading to an increase in GDP. Therefore, induced consumption depends on the level of GDP.

Autonomous Consumption

This is the type of consumption that occurs when income is zero (0). It doesn't depend on the level of income unlike induced consumption. This is the kind of consumption that makes an individual borrow or withdrawal from savings in order to make purchases. It's the amount of goods consumed regardless of income. This type of consumption doesn't depend on GDP level as level of income doesn't affect it.