If Y = $200 billion,c = 0.75,autonomous consumption = $10 billion,and T = $20 billion,induced consumption expenditure is
A)$135 billion.
B)$200 billion.
C)$180 billion.
D)$150 billion.

Question

Quizplus · Accepted Answer

Induced consumption expenditure is calculated as c(Y - T) where c is the marginal propensity to consume, Y is the income, and T is the taxes. Here, it's 0.75 * ($200 billion - $20 billion) = 0.75 * $180 billion = $135 billion.

If Y = $200 Billion,c = 0