Consumption is a positive function of current income
Channel: econom
Date: 24/11/2015

Consumer spending by households is determined mainly by their current income. A positive relationship exists between income and consumption. According to Keynes an increase in income increases consumer spending, but the increase in consumer spending is less than the increase in income.

This relationship between an increase in income and corresponding but smaller increase in consumption is captured by the marginal propensity to consume.