file-309740403(3).docx - Running head CHANGES IN AUTONOMOUS SPENDING Changes in Autonomous Spending Student\u2019s Name Institutional Affiliation 1 CHANGES

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Running head: CHANGES IN AUTONOMOUS SPENDING 1Changes in Autonomous SpendingStudent’s NameInstitutional Affiliation
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CHANGES IN AUTONOMOUS SPENDING 2Changes in Autonomous SpendingAn understanding of how the concept of the consumption function is necessary for answering this paper. The consumption function, which is also known as the Keynesian consumption function, shows the relationship between total consumption and a person’s net income. Broadly, the consumption function argues that consumer spending (C) depends on three factors, namely; disposable income (Yd), autonomous consumption (a), and an individual’s marginal propensity to consume (b). Disposable income refers to individuals net incomes after government intervention, such as tax or benefits. Autonomous consumption refers to expenses that people must incur even when their incomes are zero, such as expenses on food (Krugman & Wells, 2017). Marginal propensity to consume is a measure that shows the percentage of inducedconsumption in a product. Accordingly, the consumption function formula is presented as follows:C= a + b(Yd)A change in autonomous spending leads to a shift in the consumption function.
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