Let the Consumption Function Be Defined by C = 0

question 15

Multiple Choice

Let the consumption function be defined by C = 0.85 + 0.8YDP with permanent disposable income specified according to YDP = 0.75YD + 0.25YD-1) . Which of the following is true?

• A) The long-run MPC = 0.85 while the short-run MPC = 0.6.
• B) The long-run MPC = 0.8 while the short-run MPC = 0.75.
• C) The long-run MPC = 0.8 while the short-run MPC = 0.6.
• D) The long-run MPC = 0.8 while the short-run MPC lies somewhere between 0.25 and 0.75.
• E) Both the long-run MPC and the short-run MPC equal 0.8.

---

Definitions:

Alveoli

Tiny air sacs in the lungs where the exchange of oxygen and carbon dioxide takes place.

Capillaries

Small blood vessels in the body's circulatory system that facilitate the exchange of water, oxygen, carbon dioxide, and many other nutrients and waste substances between blood and tissues.

Active Transport

The movement of molecules across a cell membrane from a region of lower concentration to one of higher concentration, using energy usually in the form of ATP.

Plasma Membrane

The lipid bilayer membrane that surrounds a cell, controlling the movement of substances in and out of the cell.