Let the consumption function be given by C = 0.85 + 0.8YDP with permanent disposable income specified according to YDP = 0.75YD +
0)25YD-1). Let there be a permanent $1,000 increase in income. Two years later, consumption will have increased by
A) $1,000.
B) $850.
C) $800.
D) Something between $600 and $800.
E) $600.

Question

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The Answer of Let the consumption function be given by C = 0.85 + 0.8YDP with permanent disposable income specified according to YDP = 0.75YD +
0)25YD-1). Let there be a permanent $1,000 increase in income. Two years later, consumption will have increased by
A) $1,000.
B) $850.
C) $800.
D) Something between $600 and $800.
E) $600.

Let the Consumption Function Be Given by C = 0