1. Explain the concept of autonomous consumption.2. Identify factors that would cause consumption spending to...

1. Explain the concept of autonomous consumption.

2. Identify factors that would cause consumption spending to increase. What effect would that have on aggregate demand?

Expert Solution

Autonomousconsumption- it is the consumption which is not depend on current income . Current income can be zero , autonomous consumption- takes from previous savings.

An expenditure that does not vary with one's income. Examples of autonomous consumption include rent or mortgage payments and debt service. ... If one's income is zero, then autonomous consumption is financed by spending savings or by borrowing.

Answer )Consumption function, in economics, the relationship between consumer spending and the various factors determining it. At the household or family level, these factors may include income, wealth, expectations about the level and riskiness of future income or wealth, interest rates, age, education, and family size.

Increase in consumption spending will shift aggregate demand curve to rightwards as aggregate demand increases

Rahul Sunny answered 3 years ago

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