In the consumption function,suppose a = 60,c = 0.75,Y = 3000,and T = 800.Consumption expenditure is
A)2910.
B)2245.
C)1710.
D)1590.
E)1510.

Question

Quizplus · Accepted Answer

The consumption function can be represented as C = a + c(Y-T), where:

- C is consumption expenditure
- a is autonomous consumption (consumption when income is zero)
- c is the marginal propensity to consume (the fraction of income that is consumed)
- Y is income
- T is taxes

Plugging in the given values, we get:

C = 60 + 0.75(3000-800)
C = 60 + 0.75(2200)
C = 60 + 1650
C = 1710

Therefore, the answer is C, consumption expenditure is $1710.

In the Consumption Function,suppose a = 60,c = 0