Q.

The functional relationship between income and consumption expenditure is explained by -

A. Consumer' Surplus
B. Law of Demand
C. Law of Supply
D. Keynes's psychological law of consumption
Answer» D. Keynes's psychological law of consumption
Explanation: Keynes defined Psychological Law of Consumption in terms of, "The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, to increase their consumption as their income in- creases but not by as much as the increase in the income."
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