Question

In: Economics

Suppose that the consumption function is given by C = 600 + 0.8Y.


Suppose that the consumption function is given by C = 600 + 0.8Y. This implies that if people’s disposable income increases by $100, the consumption will rise by $________, and the saving will rise by $________.



80; 40



80; 20



800; 400



800; 200

Solutions

Expert Solution

Here, the MPC is 0.8, that means if the income increase by 100 then consumption will increase by 80 and savings will increase by 20. the answer is "B".

Rahul Sunny answered 2 years ago
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