The Keynesian consumption function does not display consumpt

The Keynesian consumption function does not display consumption smoothing, be- cause consumption is not a¤ected by future income.

Solution

ANSWER:

It\'s a true statement. Consumption smoothing refers to an economic concept used to express the people\'s desire to have a stable path of consumption. People desire to translate the consumption from high income periods to low income periods to gain more stability and predictability. Keynesian Theory implies that consumption is a function of current disposable income, and consumption is not accepted by future income thus does not display consumption smoothing.