Question

Suppose the consumption function of the US economy is C = 10 + 0.8Y, when Y is total output or income. If we want to draw this function on the diagram when total output (Y) is on the X-axis, what is the Y-axis intercept (autonomous consumption) and what is the slope (marginal propensity to consume (MPC) of this consumption function, respectively?

A. 0.8 and 10
B. 10 and 100
C. 100 and 10
D. 10 and 0.8

Answer 1

The Y-axis intercept is 10 and the slope is 0.8.

Step-by-step explanation:

The consumption function is represented by the equation C = 10 + 0.8Y, where C is the level of consumption and Y is the level of total output or income. To draw this function on a diagram with Y on the X-axis, the Y-axis intercept (autonomous consumption) is 10 and the slope (marginal propensity to consume) is 0.8.