Consider the Consumption Function in a Simple Macro Model with No

question 41

Multiple Choice

Consider the consumption function in a simple macro model with no taxes.At the level of national income where APC = 1,the nation's households are

• A)consuming all of their disposable income.
• B)allocating their income equally between saving and consumption.
• C)saving a portion of their income,but saving is less than consumption.
• D)spending more than their current income.
• E)saving all of their disposable income.

---

Definitions:

Constant Returns to Scale

Constant Returns to Scale occur when an increase in all inputs leads to a proportional increase in output, indicating linear growth.

Output Q₁

Refers to the quantity of goods or services produced at the first level of output in a production process.

Output Q₃

A specified level of output or production, often denoted as Q₃ to represent a particular point on a supply or production curve.

Diseconomies of Scale

The phenomenon where increasing production leads to an increase in the average costs of production, opposite of economies of scale.