In the consumption function C = a + c(Y -T),induced consumption is
A)a + c(Y -T).
B)a + cY.
C)cY.
D)c(Y - T).

Question

Quizplus · Accepted Answer

Induced consumption is the consumption that is determined by the level of disposable income. In the consumption function given, induced consumption is represented by the term c(Y-T). Therefore, the best choice for induced consumption is option D, which is c(Y-T). Options A and B include an intercept term (a) which represents autonomous consumption, not induced consumption. Option C only includes the income term (Y) and does not factor in taxes (T), which are a crucial determinant of disposable income and therefore induced consumption.

In the Consumption Function C = a + C(Y -T),induced