Consumption is defined as which of the following?

• A. The amount of goods/services demanded by households in an economy
• B. The level of government spending
• C. The total capital stock
• D. The value of exports

Answer: (B)

Consumption is the spending by households on goods and services in a given period. It represents the household component of aggregate demand and reflects how much people buy for daily use, rather than investing, government purchases, or exports. The other options refer to different concepts: government spending is expenditure by the government, not by households; total capital stock is the accumulated stock of physical capital, not spending; and the value of exports is the foreign demand for domestically produced goods, part of net exports. So the best definition is the amount of goods and services demanded by households in the economy.