The Canadian consumption function is given by C = 50 + 0.75 Y.This implies that
A)Canadians spend 75 percent of their income on average.
B)Each Canadian spends 75 percent of her/his income.
C)Canadians on average spend 75 cents out of each additional dollar earned.
D)Canadians spend 50 dollars of their income on average.

Question

Quizplus · Accepted Answer

The consumption function states that for every additional dollar earned (Y), Canadians will spend 75 cents (0.75Y). Therefore, choice C is the best answer as it accurately reflects this relationship. Choices A and B are incorrect as they suggest that Canadians spend a fixed percentage or amount of their income, which is not true based on the given information. Choice D only reflects the intercept of the consumption function, which is $50, but it does not provide information about the relationship between income and spending.

The Canadian Consumption Function Is Given by C = 50