When the consumption function is expressed as C = Ca + b (1- t)y, "b(1- t)" is the

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Quizplus · Accepted Answer

"b(1- t)" represents the adjusted MPC, which is the fraction of additional disposable income that is spent on consumption after adjusting for taxes. The multiplier is a separate concept that represents the overall increase in GDP resulting from an increase in autonomous spending. The MPC is only a part of the multiplier. Income tax is not represented by "b(1- t)" but rather the variable "t" in the equation.

When the Consumption Function Is Expressed as C = Ca