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According to the keynesian consumption function, an increase in disposable income will result "an increase in consumption".
What is keynesian consumption function/consumption function?
The consumption function, often known as the Keynesian consumption function, is now a mathematical expression expressing the functional connection between total expenditure and gross domestic product.
Some characteristics of keynesian consumption function are-
- John Maynard Keynes, a British economist, introduced it and said it could be used to monitor and foresee total aggregate consumption spending.
- According to the traditional consumption function, changes in income and consumer spending are entirely correlated. If this were the case, aggregate savings ought to rise proportionately as the GDP does over time.
- The goal is to establish a mathematical link between consumer spending and disposable income, but only at the aggregate level.
- One of the pillars for Keynesian macroeconomic theory is the consistency of either the consumption function, which is based in part upon Keynes' Psychological Law to Consuming and is particularly striking when compared to the volatility of investment.
- The majority of post-Keynesians acknowledge that because spending patterns vary as income increases, so consumption function is just not long-term stable.
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