Here is a consumption function: C = C₀ + MPC(Y_d).If C₀ = $200,then we know that A) if Y_d is zero,C will be $200. B) when Y_d rises,C rises by $200. C) when Y_d falls,C falls by MPC times C₀. D) C will always equal C_0.

Question

Quizplus · Accepted Answer

If Y_d is zero, the second term of the consumption function becomes zero and C will only depend on C₀, which is $200.

Here Is a Consumption Function: C = C0 + MPC(Yd)

Here Is a Consumption Function: C = C₀ + MPC(Y_d)