If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then savings:
A) decreases by 0.85 units.
B) decreases by 0.15 units.
C) increases by 0.15 units.
D) increases by 0.85 units.

Question

Quizplus · Accepted Answer

Savings is the part of income not consumed. If Y increases by 1 unit, consumption increases by 0.85 units (0.85Y), so savings increase by the remaining 0.15 units.

If the Consumption Function Is Given by C = 150