Question

Explain consumption function and investment function

Answer 1

Explanation:

The consumption function, or Keynesian consumption function, is an economic formula that represents the functional relationship between total consumption and gross national income. It was introduced by British economist John Maynard Keynes, who argued the function could be used to track and predict total aggregate consumption expenditures.

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Answer 2

Answer:

CONSUMPTION FUNCTION:-

Consumptionn function is the main key component of Keynesian Theory. It is also known as fundamental psychological law. According to this law,as income increases consumption also increases but not in the same proportion as increase in the income. Thus, a part of increased income is consumed and another part if income is saved.

INVESTMENT FUNCTION:-

In Economics, investment means to acquire new productive assets and produce goods and services from these new productive assests. If we do not use such assests to produce goods and services,then this will simply be known as capital formation. But as soon as these assets are used in production of goods and services then capital formation turns into investment

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