Suppose the Consumption Function Is Given by the Equation C

question 117

Multiple Choice

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?

• A) 2.0
• B) 0.2
• C) 0.8
• D) 100

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the company's books for the next period.

Operating Entity

An organization or firm that engages in commercial, industrial, or professional activities.

Owner's Capital Account

An account on a company's balance sheet representing the total investment made by the owner(s), minus any withdrawals.

Financial Statements

Comprehensive reports that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.