ABSTRACT
What came to be called the “Keynesian” consumption function is one which makes consumption a linear function of current income with a marginal propensity to consume (MPC) less than one. The empirical findings of significant and somewhat systematic deviations in the timeseries data of consumption from the long-run proportional relation of consumption to income and of a significantly higher slope coefficient in regressions using annual data on levels of consumption and personal disposable income than in regressions using changes in consumption and income led to criticism of this simple “Keynesian” function.
