If the consumption function is C = 20 + 0.8YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by
A)$58.
B)$64.
C)$80.
D)$100.

Question

Quizplus · Accepted Answer

The consumption function C = 20 + 0.8YD means that consumption is a function of disposable income, with a slope of 0.8. This means that for every $1 increase in disposable income, consumption will increase by $0.8. 
Therefore, an increase in disposable income by $100 will result in an increase in consumer expenditure by:
0.8 x 100 = $80. 
Hence, the correct answer is option C, an increase of $80.

If the Consumption Function Is C = 20 + 0