Question

Select the correct statement in the context of consumption as a component of the aggregate demand.
(A) Ex ante is the planned value of a variable as opposed to its actual value.
(B) Ex post is the actual or realised value of a variable as opposed to its planned value.
(C) Consumption changes at a constant rate the changes in income.
(D) A consumption function describes the relation between consumption and income.
Choose the correct answer from the options given below:

• A. (A), (B) and (C) only
• B. (A), (B) and (D) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Hint:

Ex-ante = Planned Intended Desired.
Ex-post = Actual Realized Observed.
Linear consumption function assumes a constant MPC (\(\Delta C / \Delta Y\)).

Answer 1

The Correct Option is C

Concept:
Aggregate demand analysis in Keynesian economics distinguishes between planned variables and realized variables, and characterizes how consumption behavior relates to aggregate income.

Step 1: Evaluating Each Statement:
- Statement (A): “Ex ante” refers to planned, intended, or expected economic values before events occur. This definition is correct.
- Statement (B): “Ex post” denotes the actual, measured, or realized values recorded after transactions conclude. This definition is correct.
- Statement (C): In the standard linear consumption model used in macroeconomic analysis (\(C = \bar{C} + bY\)), the slope \(b\) (MPC) remains constant, meaning consumption changes at a constant rate as income changes. This statement is correct.
- Statement (D): A consumption function explicitly models and expresses the functional relationship between consumption expenditure and income level (\(C = f(Y)\)). This statement is correct.

Step 2: Conclusion:
All four statements (A), (B), (C), and (D) are accurate macroeconomic descriptions.
Final Answer:
Therefore, the correct choice is (C), comprising (A), (B), (C) and (D).