If the Consumption Function Is C = 200 + 0

question 51

Multiple Choice

If the consumption function is C = 200 + 0.8Y,which of the following is true?

• A)This economy's consumption is 300 when income is 100.
• B)When income increases by 100,consumption increases by 90.
• C)This economy's consumption is 200 when income is 0.
• D)The marginal propensity to consume in this economy is .2.
• E)When income increases by 100,consumption increases by 20.

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Definitions:

Arbitrage Opportunity

A situation where a trader can make a profit from the price difference of an asset in different markets or forms without taking significant risk.

Risk-free Rate

The theoretical return of an investment with zero risk, often represented by the yield on government bonds.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates greater volatility than the market, while a beta below 1 suggests less.

Average Returns

The arithmetic mean of the historical returns of an investment, often used as a general indication of its past performance.