Here is a consumption function: C = C₀ + MPC(Y_d).If C₀ = $4,000,then we know that A) if Y_d rises by $1,then Co rises by $1. B) if Y_d rises by $1,then C rises by $4,000. C) as C₀ rises by $150,C rises by $150. D) as C₀ rises by $150,Y_d rises by $150.

Question

Quizplus · Accepted Answer

C₀ is the autonomous consumption, which means it is the part of consumption that does not depend on disposable income (Y_d). Therefore, if C₀ rises by $150, C will also rise by $150, independent of Y_d.

Here Is a Consumption Function: C = C0 + MPC(Yd)

Here Is a Consumption Function: C = C₀ + MPC(Y_d)