Refer to the information provided in Figure 23.1 below to answer the question(s) that follow. Figure 23.1
-Refer to Figure 23.1. [500 + 0.5Y] is this household's
A) MPC.
B) MPS.
C) saving function.
D) consumption function.

Question

Refer to the information provided in Figure 23.1 below to answer the question(s) that follow.  Figure 23.1
-Refer to Figure 23.1. [500 + 0.5Y] is this household's
A) MPC. 
B) MPS. 
C) saving function. 
D) consumption function.

Quizplus · Accepted Answer

The formula [500 + 0.5Y] represents the consumption function, which shows the relationship between disposable income (Y) and consumption (C). Therefore, the correct answer is D, consumption function. It is not MPC or MPS, which represent the marginal propensity to consume and the marginal propensity to save respectively.

Refer to the Information Provided in Figure 23