If C = $400 billion + 0.75(Y_d) and if real GDP is $1,000 billion, then for any positive tax
Jrate, C =$1,150 billion.

Question

If C = $400 billion + 0.75(Y_d) and if real GDP is $1,000 billion, then for any positive tax Jrate, C =$1,150 billion.

Quizplus · Accepted Answer

The equation given for C is a consumption function that includes the variable Y_d, which represents disposable income after taxes. The statement about the positive tax rate implies that Y_d will decrease, leading to a decrease in consumption (C). Therefore, C will be less than $1,150 billion, making the statement false. The actual value of C would depend on the specific value of the tax rate.

If C = $400 Billion + 0