Consider the General Form of the Consumption Function in a Simple

question 41

Multiple Choice

Consider the general form of the consumption function in a simple macro model.Once government and taxes are included in the model,desired consumption can be expressed as ________,where a = autonomous consumption,t = net tax rate,Y = national income,YD = disposable income,and MPC = marginal propensity to consume.

• A)C = a + MPC(1 - t)YD
• B)C = a - (1 - t)YD
• C)C = a + MPC ∙ Y
• D)C = a + MPC ∙ t ∙ YD
• E)C = a + MPC(1 - t)Y

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