Figure 13-2
-Refer to Figure 13-2. An equation for the consumption function is
A) C = 1 + Y.
B) C = Y.
C) C = 1 + 2Y.
D) C = 1 + 0.5Y.

Question

Figure 13-2 
-Refer to Figure 13-2. An equation for the consumption function is
A) C = 1 + Y. 
B) C = Y. 
C) C = 1 + 2Y. 
D) C = 1 + 0.5Y.

Quizplus · Accepted Answer

The consumption function is the line that shows how much of total income (Y) will be consumed (C). By looking at the graph, we can see that the consumption function intercepts the Y-axis at 1 and has a slope of 0.5. This means that for every extra dollar of income, only 0.5 dollars will be consumed, and the remaining 0.5 dollars will be saved. Therefore, the equation for the consumption function is C = 1 + 0.5Y.

Figure 13-2 -Refer to Figure 13-2. an Equation for the Consumption Function