-Refer to the information above to answer this question.Which of the following is an expression for the consumption function (out of national income)?
A)C = 40 + 0.6Y
B)C = 80 + 0.6Y
C)C = 0.8Y
D)C = 40 + 0.8Y
E)C = 340 + 0.6Y

Question

-Refer to the information above to answer this question.Which of the following is an expression for the consumption function (out of national income)?
A)C = 40 + 0.6Y 
B)C = 80 + 0.6Y 
C)C = 0.8Y 
D)C = 40 + 0.8Y 
E)C = 340 + 0.6Y

Quizplus · Accepted Answer

The consumption function is typically represented as C = a + bY, where C is consumption, a is autonomous consumption (consumption when income is zero), b is the marginal propensity to consume (the increase in consumption for each additional unit of income), and Y is national income. Choice A, C = 40 + 0.6Y, fits this format, indicating an autonomous consumption of 40 and a marginal propensity to consume of 0.6.

-Refer to the Information Above to Answer This Question