If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:
A)0.15 units.
B)0.5 units.
C)0.85 units.
D)1 unit.

Question

Quizplus · Accepted Answer

The coefficient of Y in the consumption function is 0.85. This means that for every 1 unit increase in Y, C will increase by 0.85 units. Therefore, if Y increases by 1 unit, C will increase by 0.85 units.

If the Consumption Function Is Given by C = 150