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

question 42

Multiple Choice

Here is a consumption function: C = C₀ + MPC(Y_d) .If C₀ = $200,then we know that

• A) if Y_d is zero,C will be $200.
• B) when Y_d rises,C rises by $200.
• C) when Y_d falls,C falls by MPC times C₀.
• D) C will always equal C_0.

---

Definitions:

Indefinite Future Time

A period that has no specified end date.

Unconditional Promise

An unconditional promise is a firm commitment or pledge made by one party to another, without any stipulations or conditions attached.

Check-clearing Process

The method through which banks collect and settle the amount of a check, transferring funds from one account to another.

Movability

The characteristic of an asset that allows it to be transferred or moved from one location to another.