In the standard consumption function of C = a + bY, a change in corporate stock prices would be reflected by a change in
A) Y.
B) b.
C) a.
D) both A and B.

Question

Quizplus · Accepted Answer

In the standard consumption function C = a + bY, a change in corporate stock prices would likely affect consumer confidence and wealth, leading to a change in autonomous consumption, which is represented by "a". "Y" represents income, and "b" is the marginal propensity to consume, neither of which are directly affected by stock prices in this context.

In the Standard Consumption Function of C = a