CONSUMPTION FUNCTION: The positive relation between household consumption expenditures and household disposable income that forms one of the key building blocks for Keynesian economics. The consumption function is commonly presented as the consumption line or propensity-to-consume line. The slope of this line is the marginal propensity to consume, which is the proportion of any additional income used for consumption. The consumption function and the marginal propensity to consume play key roles in the multiplier and accelerator concepts. Because saving is the difference between disposable income and consumption, the saving function is a complementary relation to the consumption function.

     See also | Keynesian economics | consumption expenditures | disposable income | consumption line | multiplier | accelerator | saving function | income-expenditure model | marginal propensity to consume | induced consumption | autonomous consumption |

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The interest rate charged by one commercial bank or depository institution for lending Federal Reserve deposits to another commercial bank or depository institution. This is the interest rate determined in the Federal funds market. The Federal funds rate is a key interest rate for both the banking system and the macroeconomy. It is often targeted by monetary policy and is a benchmark used to determine other interest rates in the economy.

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