Suppose the consumption function is C = $200 + 0.85Y_D.If disposable income is $400,consumption is A)$200. B)$540. C)$340. D)$185.

Question

Quizplus · Accepted Answer

Plug in $400 for Y in the consumption function: C = $200 + 0.85($400)_D C = $200 + 340_D The value of _D is not given, so we cannot determine the exact value of consumption. However, we know that it will be greater than $200, the autonomous consumption component. The only answer choice that is greater than $200 is B, $540.

Suppose the Consumption Function Is C = $200 + 0