The intercept term of the consumption function is A) the marginal propensity to consume (C_y). B) the marginal propensity to consume times one minus the tax rate (C_y x(1-t)). C) the marginal propensity to save. D) the baseline level of consumption spending (C₀).

Question

Quizplus · Accepted Answer

The intercept term of the consumption function represents the baseline level of consumption spending that occurs even when income is zero. It reflects the autonomous consumption that does not depend on income.

The Intercept Term of the Consumption Function Is