Refer to the information provided in Figure 23.4 below to answer the question(s) that follow. Figure 23.4
-Refer to Figure 23.4. Suppose the consumption function for C₁ = 20 + 0.5Y, the consumption function that best fits C₃ is

Question

Refer to the information provided in Figure 23.4 below to answer the question(s) that follow.

Figure 23.4
-Refer to Figure 23.4. Suppose the consumption function for C₁ = 20 + 0.5Y, the consumption function that best fits C₃ is

Quizplus · Accepted Answer

The consumption function for C₃ is C₃ = 20 + 0.8Y, which is the same as the consumption function for C₁ except that the marginal propensity to consume (MPC) is 0.8 instead of 0.5. This means that for every additional dollar of income, consumers will spend 80 cents on consumption, rather than 50 cents.

Refer to the Information Provided in Figure 23