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Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion. What would be the slope of the consumption function for this nation
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Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion. What would be the slope of the consumption function for this nation

User Zelimir
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1 Answer

2 votes

Answer:

b. 0.1

Step-by-step explanation:

Options include "a. 0.5 b. 0.1 c. 1 d. 0.25 e. 0.4"

Consumption = C+Mpc * Yd

When C is autonomous consumption

Yd is disposable income.

Hence, if Yd increases by 500, consumption will increases by 500*Mpc =50 So, Mpc =50/500

Mpc = 0.1

User Pmcoltrane
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