Suppose the consumption function is represented as follows: C = 200 + 0.75Y. If Y increases by $100, then consumption would increase by:

Question

Quizplus · Accepted Answer

According to the given consumption function, consumption (C) increases by 0.75 for every $1 increase in income (Y). Therefore, if Y increases by $100, consumption would increase by:
C = 200 + 0.75Y
C = 200 + 0.75(100)
C = 200 + 75
C = $275
So, consumption would increase by $75. Therefore, the correct answer is choice B.

Suppose the Consumption Function Is Represented as Follows: C =