Question

The consumption that takes place when income is zero. It is called

• A. Autonomous consumption
• B. Induced consumption
• C. Autonomous investment
• D. None of these

Hint:

Autonomous consumption is essential for understanding the baseline consumption levels in an economy, especially in Keynesian economics.

Answer 1

The Correct Option is A

Step 1: Defining autonomous consumption.
Autonomous consumption refers to the consumption that occurs even when income is zero. This type of consumption is usually financed by savings or borrowing, and it represents the baseline level of consumption in an economy.
Step 2: Explanation of induced consumption.
Induced consumption refers to the consumption that changes as income changes. As income increases, induced consumption also increases. This is not the consumption that occurs when income is zero.
Step 3: Comparison with other options.

• (A) Autonomous consumption: Correct. This is consumption that takes place even when income is zero.
• (B) Induced consumption: Incorrect. This consumption occurs as a result of an increase in income, not when income is zero.
• (C) Autonomous investment: Incorrect. This term refers to investment that occurs without regard to income levels.
• (D) None of these: Incorrect. Option (A) is the correct answer.

Step 4: Conclusion.
Therefore, the consumption that takes place when income is zero is termed autonomous consumption. Final Answer: Autonomous consumption.