In macroeconomics, in contrast to investment spending, consumption spending is generally considered to move much less violently over the business cycle. In this context, which of the following statements correctly describes the typical behavior of consumption compared with investment?

Introduction / Context:
Consumption and investment are two major components of aggregate demand in macroeconomics. Examination of how these components behave over the business cycle is an important theme in introductory macroeconomics and finance. The question asks how consumption spending behaves in contrast to investment spending and which description accurately captures this difference in stability.

Given Data / Assumptions:

• The question refers to overall consumption spending in an economy, mainly household spending on goods and services.
• Investment spending refers to business spending on capital goods and inventories, and residential construction.
• We assume a normal market economy with usual business cycle fluctuations.
• We compare the relative stability or variability of these two components over time.

Concept / Approach:
In macroeconomics, it is a standard empirical observation that consumption is smoother and more stable over time than investment. Investment tends to be very volatile because it depends strongly on business expectations, interest rates, and future profitability. In contrast, consumption is tied to household income and habits, and many households prefer to smooth consumption over time. As a result, when output and income change, investment usually swings more dramatically, while consumption changes more gradually. Therefore, the correct description is that consumption is relatively stable compared with investment.

Step-by-Step Solution:
Step 1: Recall that investment spending typically rises sharply in booms and falls sharply in recessions. Step 2: Recall that consumption spending also changes with income, but households try to smooth their standard of living over time. Step 3: Because of consumption smoothing, consumption does not fluctuate as much as investment for a given change in national income. Step 4: Therefore, when we compare the two components, we describe consumption as relatively stable and investment as relatively unstable. Step 5: Among the options, the statement that consumption is relatively stable best expresses this widely accepted macroeconomic pattern.

Verification / Alternative check:
In many introductory macroeconomics textbooks, graphs of real gross domestic product are decomposed into consumption and investment. Those graphs show that the line for consumption is smoother over time, while the line for investment shows large spikes and drops. This real world data based observation supports the theoretical view that consumption is relatively stable compared with investment. Therefore, selecting the option that states consumption is relatively stable is consistent with empirical evidence and standard theory.

Why Other Options Are Wrong:
Option a, relatively unstable, is incorrect because it reverses the usual description and would be more accurate for investment, not consumption.
Option c, unmeasurable, is incorrect because both consumption and investment are regularly measured in national income accounts and are fundamental macroeconomic statistics.
Option d, always equal to investment, is incorrect because there is no rule that consumption must equal investment at any point in time. They are separate components of aggregate demand.
Option e, always larger than investment, may be often true in magnitude but it does not answer the question about stability, so it is not the best choice.

Common Pitfalls:
A common mistake is to focus only on the absolute size of consumption versus investment rather than their variability. Another pitfall is to think that all components of aggregate demand move in exactly the same manner over the business cycle, when in fact some are much more volatile. Students may also confuse the idea of stability with the level of spending. The correct interpretation is about how much the variable fluctuates, not whether it is larger or smaller in rupee terms.

Final Answer:
The correct statement is that consumption is relatively stable compared with investment.