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Which is the major determinant of Keynesian consumption function?

1. National income
2. Interest rates
3. Disposable income
4. Investment

Correct answer: Disposable income

Solution

In Keynesian economics, consumption (C) is primarily driven by disposable income (Yd=Y-T). C=a+bYd where b=marginal propensity to consume. Disposable income is the key determinant.

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