If the consumption function is expressed as C = a + mpc × YD,then "a" represents
A)autonomous consumer expenditure.
B)the marginal propensity to consume.
C)the expenditure multiplier.
D)disposable income.

Question

Quizplus · Accepted Answer

"a" represents autonomous consumer expenditure, which is the amount of consumption that is independent of changes in disposable income. This could include things like fixed expenses or necessary purchases that are not affected by changes in income. The marginal propensity to consume (MPC) represents the change in consumption that occurs as a result of a change in disposable income, and is represented by the slope of the consumption function. The expenditure multiplier is a concept used in macroeconomics to describe the amount by which an initial change in spending will be magnified throughout the economy, and is not directly related to the consumption function. Disposable income is represented by YD in the consumption function, and is the amount of income available to consumers after taxes and other deductions have been taken out.

If the Consumption Function Is Expressed as C = a