Figure 15-2

-In Figure 15-2 above,the difference between consumption levels at point A and point B is equal to
A)the long run MPC times the change in disposable income.
B)the short run MPC times the change in disposable income.
C)(Y₀ - Y₂)times the short run change in income.
D)the long run change in income times (Y₀ - Y

Question

Figure 15-2
 
-In Figure 15-2 above,the difference between consumption levels at point A and point B is equal to
A)the long run MPC times the change in disposable income. 
B)the short run MPC times the change in disposable income. 
C)(Y₀ - Y₂)times the short run change in income. 
D)the long run change in income times (Y₀ - Y

Quizplus · Accepted Answer

The difference between consumption levels at point A and B is equal to the short run MPC (marginal propensity to consume) times the change in disposable income. This is because point A represents the initial consumption level at the starting income level Y₀, while point B represents the new consumption level after an increase in disposable income to Y₁. The change in consumption is then the difference between these two points, which is equal to the short run MPC (slope of the consumption function) times the change in disposable income (Y₁ - Y₀).

Figure 15-2 -In Figure 15-2 Above,the Difference Between Consumption Levels at Point