If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by
A)$25.
B)$70.
C)$50.
D)$100.

Question

Quizplus · Accepted Answer

Substituting $100 for YD in the consumption function, we get: 
C = 20 + 0.5($100) 
C = 20 + $50 
C = $70

Therefore, an increase in disposable income by $100 will result in an increase in consumer expenditure by $70, making choice B the correct answer.

If the Consumption Function Is C = 20 + 0