Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
-Refer to Figure 8.1. This household's consumption function is
A) C = 200 + 0.2Y.
B) C = 300 + 0.75Y.
C) C = 500 + 0.5Y.
D) C = 1,000 + 0.2Y.

Question

Refer to the information provided in Figure 8.1 below to answer the questions that follow.  Figure 8.1
-Refer to Figure 8.1. This household's consumption function is
A) C = 200 + 0.2Y. 
B) C = 300 + 0.75Y. 
C) C = 500 + 0.5Y. 
D) C = 1,000 + 0.2Y.

Quizplus · Accepted Answer

The consumption function C = 500 + 0.5Y indicates that the household has a base consumption level of 500 (which is the intercept with the Y-axis, representing consumption when income is 0) and consumes an additional 50% (0.5) of any additional income (Y), which matches the typical form of a consumption function C = a + bY, where a is autonomous consumption and b is the marginal propensity to consume.

Refer to the Information Provided in Figure 8