Here Is a Consumption Function: C = C₀ + MPC(Y_d)

question 154

Multiple Choice

Here is a consumption function: C = C₀ + MPC(Y_d) .If MPC is 0.91,then we know that

• A) as Y_d rises by $1,Co rises by $0.91.
• B) as Y_d rises by $1,C rises by $0.91.
• C) Y_d rises by $0.91.
• D) as C₀ rises by $0.09,Y_d rises by $1.

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Definitions:

Constant

A fixed value in mathematics and physics that does not change, or a situation in finance where certain conditions, like interest rate, remain unchanged over a period.

Expected Dividend

The forecasted dividend payment announced by a company for the upcoming period.

Expected Dividend Yield

The anticipated yield that an investment in stock will return in the form of dividends, expressed as a percentage of the stock's current price.

Constant

In financial terms, a fixed value that does not change over the period under consideration, often used in calculating interest and annuities.