Use Table 10.3,which shows the relationship between consumption and income.Assume the price level is constant. $\begin{array}{ll}\text { Disposal Income } & \text { Total Consumption }& \text { Investment }& \text { Total Expenditure }\\\text { (Billions per Year) }& \text { (Billions per Year) }& \text {(Billions per Year) }& \text { (Billions per Year) }\\\hline\$ 0 & \$ 200 & \$ 100 &\_\_\_\\200 & 300 & 100&\_\_\_ \\400 & 400 & 100&\_\_\_ \\600 & 500 & 100&\_\_\_\end{array}$

$\text { Table } 10.3$ Which of the following represents the consumption function consistent with Table 10.3?

Question

Use Table 10.3,which shows the relationship between consumption and income.Assume the price level is constant.

\begin{array}{ll}\text { Disposal Income } & \text { Total Consumption }& \text { Investment }& \text { Total Expenditure }\\\text { (Billions per Year) }& \text { (Billions per Year) }& \text {(Billions per Year) }& \text { (Billions per Year) }\\\hline\$ 0 & \$ 200 & \$ 100 &\_\_\_\\200 & 300 & 100&\_\_\_ \\400 & 400 & 100&\_\_\_ \\600 & 500 & 100&\_\_\_\end{array}

\text { Table } 10.3

Which of the following represents the consumption function consistent with Table 10.3?

Quizplus · Accepted Answer

The consumption function is C = a + bY_D, where a is autonomous consumption and b is the marginal propensity to consume (MPC). From the table, when disposable income is $0, consumption is $200 billion, indicating autonomous consumption (a) is $200 billion. The change in consumption when income increases from $0 to $200 billion is $100 billion, so MPC (b) is 0.50. Thus, the function is $200 billion + 0.50Y_D.

Use Table 10 Table 10.3\text { Table } 10.3 Table 10.3 Which of the Following Represents the Consumption Function Consistent with the Price

Use Table 10 $\text { Table } 10.3$ Which of the Following Represents the Consumption Function Consistent with the Price