Let the Consumption Function Be Given by C = 80

question 24

Multiple Choice

Let the consumption function be given by C = 80 + 0.9YDP with permanent disposable income specified according to YDP = 0.5YD + 0.3YD-1) + 0.2YD-2) . Two years after a permanent increase in income of $1,000, consumption will have increased by

• A) $1,000.
• B) $900.
• C) $800.
• D) $720.
• E) $80.

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Definitions:

Marginal Revenue

The additional revenue that a producer receives from selling one more unit of a good or service.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.

Lack of Response

The absence of a reaction or reply to a communication or situation, often indicating disinterest or avoidance.

Critical Evaluation

involves analyzing and assessing the merits and faults of something in detail to understand its value, quality, or importance.