Autonomous consumption expenditures are (LO5) a) equal to induced consumption expenditures b) proportional to disposable income c) not influenced by income d) influenced primarily by the saving function

Short Answer

Expert verified
Autonomous consumption expenditures are not influenced by income. (Option c)

Step by step solution

01

Understanding Autonomous Consumption Expenditures

Autonomous consumption expenditures are the part of consumption expenditures that occur when income levels are zero. They are determined by factors like consumer confidence, government policies or programs, and other non-income related factors. In other words, these are the expenditures that occur regardless of the individual's or household's income level.
02

Analyzing each option

Let's analyze each option based on our understanding of autonomous consumption expenditures: a) equal to induced consumption expenditures: Induced consumption expenditures are the consumption that varies with the level of income. Thus, autonomous consumption expenditures are not equal to induced consumption expenditures. So, this option is incorrect. b) proportional to disposable income: Autonomous consumption expenditures are not related to income levels as they occur irrespective of individual's or household's income. Therefore, they are not proportional to disposable income. So, this option is also incorrect. c) not influenced by income: As mentioned earlier, autonomous consumption expenditures occur irrespective of an individual's or a household's income level. So, they are not influenced by income. This option seems to be correct. d) influenced primarily by the saving function: The saving function represents the relationship between saving and income. Autonomous consumption expenditures are not related to income; hence, they are not influenced primarily by the saving function. So, this option is incorrect.
03

Conclusion

Based on our analysis of each option, we can conclude that the correct answer is: c) Autonomous consumption expenditures are not influenced by income.

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