Final answer:
In the formula for aggregate consumption, C1 represents the marginal propensity to consume (MPC), which indicates how much consumption will change in response to a change in disposable income.
Step-by-step explanation:
In the expression for aggregate consumption C = C0 + C1Y, the term C1 is known as the marginal propensity to consume (MPC). The MPC reflects the increase in consumer spending that occurs with an increase in disposable income. In this context, when national income is represented by Y and taxes by T, the formula modifies to C = C0 + C1(Y - T), where C1 still represents MPC after taxes are accounted for. Understanding the consumption function is crucial for analyzing how households adjust their spending in response to changes in income levels within the entire economy.