Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.80,then we know that

Name: Here is a consumption function: C = C 0 + MPC(Y d ).If MPC is 0.80,then we know that
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Quizplus · Accepted Answer

MPC is the marginal propensity to consume, which tells us how much of an increase in income will be consumed or spent. In this case, if Y_d (disposable income) rises by $1, then the consumption expenditure C will rise by 0.80, which is the value of MPC. Therefore, choice B is the correct answer.

Here Is a Consumption Function: C = C0 + MPC(Yd)

Here Is a Consumption Function: C = C₀ + MPC(Y_d)