Answer to Question #87706 in Macroeconomics for Martha

Question

The consumption function is a formal representation of

Answer 1

The consumption function is a formal representation of  the relationship between the size of the disposable income (i.e., income after  taxes) and the level of consumption. According to Keynes,

$$C=a+b*Y$$

where C - is level of consumption, a - is autonomous consumption (independent of income level), b- is the propensity to consume, and Y - is disposable income. Since autonomous expenditures as a whole do not change, the level of consumption will increase with an increase in the propensity to consume and / or disposable income.