Let the consumption function be represented by the following equation: C = c₀ + c₁YD.For this equation,we assume that c₁ is

Question

Quizplus · Accepted Answer

None of the options given are correct. The equation for the consumption function is C = c₀ + c₁YD, where c₀ is the autonomous consumption and c₁ is the marginal propensity to consume (MPC). The MPC represents the change in consumption due to a change in disposable income. The value of the MPC is typically between 0 and 1, but it can be negative (if consumption falls as income rises, implying that people save more as their incomes increase). The value of c₁ is not necessarily larger than c₀ and it does not change with different levels of income. It is also not equal to one. Therefore, option (E) is the correct answer.

Let the Consumption Function Be Represented by the Following Equation