Question

Any increase in autonomous consumption is associated with: an equivalent inerease in autonomous saving. an equivalent decrease in autonomous saving. an equivalent increase in the slope of the saving function. an equivalent decrease in the slope of the consumption function. an equivalent movement along the consumption function.

Answer 1

The correct answer is 'Option B'.

Autonomous consumption refers to the level of consumption when the income is zero. Autonomous savings are the baseline level of savings which the household sector saves for the event of zero income.

When there is autonomous consumption i.e. consumers consuming when the income is zero then they would wither borrow the money or use the savings to finance the expenditure. This will decrease the level of autonomous savings. So, the correct answer is 'Option B'.