If consumption is given by C= 10 + 0.8 Yd then as income increases:
A) The size of the marginal propensity to consume increases and approaches the average propensity to consume.
B) The size of the marginal propensity to consume approaches 1.
C) The size of the average propensity to consume approaches infinity.
D) The size of the average propensity to consume approaches the marginal propensity to consume.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is constant at 0.8, and as income (Yd) increases, the average propensity to consume (APC), which is C/Yd, approaches the MPC because the constant term (10) becomes less significant relative to Yd.

If Consumption Is Given by C= 10 + 0