Suppose the consumption function is C = $500 + 0.8Y. If Y = $1,000, then induced consumption is
A) $500.
B) $800.
C) $1,000.
D) $1,300.

Question

Quizplus · Accepted Answer

Induced consumption is the part of consumption that changes as income changes. In this case, when Y increases from $0 to $1,000, induced consumption is equal to 0.8 times the change in income. 
Thus, induced consumption = 0.8 x ($1,000 - $0) = $800. Therefore, the correct choice is B.

Suppose the Consumption Function Is C = $500 + 0