Suppose There Are Three Economies with 3 Different Consumption Functions

question 154

Multiple Choice

Suppose there are three economies with 3 different consumption functions: Country A: C = 100 + 0.8Y Country B: C = 200 + 0.75 Y
Country C: C = 75 + 0.9Y
In which of these countries is the marginal propensity to consume the largest?

• A) Country B
• B) Country C
• C) Country A
• D) All countries have the same marginal propensity to consume.

---

Definitions:

Basic Necessities

Goods or services considered essential for maintaining a minimum standard of living, such as food, water, shelter, and healthcare.

Utilitarian Justice

A principle that advocates for actions that promote the greatest happiness or utility for the greatest number of people.

Decreasing Marginal Utility

The economic principle stating that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Redistribution

The process of reallocating income, wealth or resources from certain groups within society to others, often through taxation and welfare systems.