Question

According to the consumption​ function,
what variables determine aggregate spending on consumer goods and​ services?
A. Consumer spending depends on disposable​ income, the real interest​ rate, and other variables such as​ consumers' optimism and wealth.
B. Consumer spending depends on disposable​ income, the real interest​ rate, and the​ export-to-import ratio.
C. Consumer spending depends only on disposable income and the real interest rate.
D. None of the above are correct.

Answer 1

Answer:

The correct answer is option A.

Explanation:

Consumer spending refers to the expenditure of households on consumer goods and services. The aggregate consumer spending depends upon the disposable income of the consumer, the real interest rate, consumer optimism and wealth.  

Consumer spending is positively related to disposable income, consumer optimism and wealth. The real interest rate is inversely related to consumer spending.