Assume That the Consumption Function Is Given by C =

question 72

Multiple Choice

Assume that the consumption function is given by C = 200 + 0.7(Y - T) , the tax function is given by T = 100 + t₁Y, and Y = 50K^0.5L^0.5, where K = 100 and L = 100. If t₁ increases from 0.2 to 0.25, then consumption decreases by:

• A)70.
• B)140.
• C)175.
• D)250.

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