If the consumption function is C = 90 + 0.75y, then the level of autonomous consumption is
A) 0.25.
B) 0.75.
C) 67.5.
D) 90.

Question

Quizplus · Accepted Answer

The coefficient of y in the consumption function (0.75) represents the marginal propensity to consume (MPC), which indicates the fraction of each additional dollar of income that is spent on consumption. The level of autonomous consumption is the intercept term in the consumption function (when y=0). Therefore, the autonomous consumption in this case is 90. Thus, the correct answer is D, as option D represents the autonomous consumption level of 90.

If the Consumption Function Is C = 90 + 0