Economics

Answer following: Most of the discussion on the consumption function centers around changes in disposable income. The consumption function, first theorized by John Maynard Keynes, illustrates that not all consumption spending is reliant on current income. While the amount of disposable income at person has influences many consumption decisions, some types of spending are automatic, or autonomous. Your book covers the impacts of changes in disposable income on the amount of total consumption and savings that a person can do. However, another important question is what happens when autonomous spending changes?

If autonomous consumption is consumption that occurs even when income is zero, what types of spending fall into this category? When might these types of spending change significantly? Has your autonomous consumption changed recently?

Finally, holding your disposable income constant what happen to savings when autonomous consumption increases?