(Advanced analysis)The equation C = 35 + .75Y,where C is consumption and Y is disposable income,shows that:
A) households will consume three-fourths of whatever level of disposable income they receive.
B) households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.
C) there is an inverse relationship between disposable income and consumption.
D) households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.

Question

Quizplus · Accepted Answer

The equation shows that consumption (C) is equal to a fixed amount of $35 plus 0.75 times disposable income (Y). This means that if disposable income is zero, consumption will still be $35 (fixed amount). As disposable income increases, consumption will increase by three-fourths of that increase. Therefore, option B is the correct choice.

(Advanced Analysis)The Equation C = 35