When C = c0 + c 1YD, an increase in c0 will cause which of the following to increase?

Question

Quizplus · Accepted Answer

An increase in c0, which represents autonomous consumption (consumption that does not depend on income), directly increases consumption. This increase in consumption boosts overall demand in the economy. As demand increases, it leads to an increase in equilibrium income (the level of income where planned spending equals actual spending). Since equilibrium disposable income is part of equilibrium income (after taxes), it also increases. Therefore, all of the options listed are correct.

When C = C0 + C 1YD, an Increase in C0