You Are Given the Following Information About an Economy

question 31

Multiple Choice

You are given the following information about an economy. Autonomous consumption expenditure is $40 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Net taxes are assumed to be constant and not vary with income. Exports are $500 billion and imports are $450 billion. The consumption function in billions of dollars is ________.

• A)C = 0.7(Y - 250)
• B)C = 40 + 0.7(Y - 250)
• C)C = 40 + 0.7Y
• D)C = 40 + 0.7(YD - 250)

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