If the Consumption Function Is C = 25 + 0

question 118

Multiple Choice

If the consumption function is C = 25 + 0.9y and income increases by $100, then savings will increase by

• A) $10.
• B) $25.
• C) $90.
• D) $115.

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Definitions:

Speculative Motive

The intention to hold cash or other assets in anticipation of profit from fluctuations in their prices or exchange rates.

Investment Opportunities

Options available to individuals and firms to invest capital with the intent to generate returns.

Bargain Purchases

Acquisitions made at a price significantly below the fair market value of the asset, resulting in an immediate gain for the purchaser.

Dividend Capture

A strategy in which an investor purchases securities to own them on the day of record and then quickly sells them; designed to attain dividends but avoid the risk of a lengthy hold.