Let "C = Ca+ by" define the consumption function. The term "by" is
A) autonomous consumption.
B) current income.
C) the marginal propensity to consume.
D) consumption that depends on income.

Question

Quizplus · Accepted Answer

The term "by" in the consumption function C=Ca+by represents consumption that depends on income, making it a function of income. This is the definition of induced consumption, which is the opposite of autonomous consumption (A). The marginal propensity to consume (C) represents the change in consumption for a given change in income, and current income (B) is simply a variable in the consumption function. Thus, the correct choice is D.

Let "C = Ca+ By" Define the Consumption Function