Let Real GDP =Y = Y_d, and the Consumption Function

question 164

Multiple Choice

Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + .06Y.
What is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC) ?

• A) A = $600; MPC = 0.4
• B) A = $1,000; MPC = 0.6
• C) A = $1,600; MPC = 2.5
• D) A = $2,500; MPC = 0.6

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Definitions:

Fechner's Law

A principle describing the logarithmic relationship between stimulus magnitude and perceptual intensity, suggesting that sensation increases as the logarithm of the stimulus intensity.

Weber's Law

A principle stating that the smallest perceptible change in a stimulus, or the just noticeable difference, is a constant proportion of the original stimulus.

Sensory Adaptation

The process by which sensory receptors become less sensitive to constant stimuli over time, reducing our awareness of them.

Signal Detection

A method or theory related to identifying and processing stimuli under conditions of uncertainty.