Exhibit 10-7

-Here is a consumption function: C = C₀ + MPC(Y_d) .If MPC is 0.75,then we know that

Name: Exhibit 10-7 -Here is a consumption function: C = C 0 + MPC(Y d ).If MPC is 0.75,then we know that
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Question

Exhibit 10-7 -Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.75,then we know that

Quizplus · Accepted Answer

According to the given consumption function, as Y_d (disposable income) rises by $1, the consumption (C) will rise by MPC (marginal propensity to consume) which is 0.75. Therefore, the correct answer is B: as Y_d rises by $1, C rises by $0.75.

Exhibit 10-7 -Here Is a Consumption Function: C = C0 + MPC(Yd).If

Exhibit 10-7 -Here Is a Consumption Function: C = C₀ + MPC(Y_d).If