If the consumption function is C = 25 + 0.9y and income increases by $100, then savings will increase by
A) $10.
B) $25.
C) $90.
D) $115.

Name: If the consumption function is C = 25 + 0.9y and income increases by $100, then savings will increase by A) $10. B) $25. C) $90. D) $115.
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Question

Quizplus · Accepted Answer

When income increases by $100, consumption increases by 0.9 * 100 = $90. Since the increase in consumption is $90 out of the $100 increase in income, the remaining $10 is saved, thus savings increase by $10.

If the Consumption Function Is C = 25 + 0