Question

Assume taxes are zero and an economy has a consumption function of C = 0.74 (Yd) + $659.63. How much consumption takes place if disposable income is equal to 2,495.85? Round your answer to two digits after the decimal.

Answer 1

The amount of consumption that takes place when disposable income is equal to $2,495.85 is $2,506.66.

Step-by-step explanation:

The consumption function is represented by the equation: C = 0.74 (Yd) + $659.63, where C is consumption and Yd is disposable income. To find the amount of consumption when disposable income is equal to $2,495.85, we substitute this value into the equation:

C = 0.74 (2,495.85) + $659.63 = $1,847.03 + $659.63 = $2,506.66

Therefore, the amount of consumption that takes place when disposable income is equal to $2,495.85 is $2,506.66.