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Over [174]
3 years ago
9

Suppose the consumption function is c = $200 + 0.85yd. if disposable income is $400, consumption is

Business
2 answers:
alexira [117]3 years ago
8 0
Given the consumption equation of c= 200 + 0.85yd, and the disposable income of $400, then, then we would get the consumption by substituting the given to the equation:c= 200 + 0.85ydc= 200 + 0.85(400)c= 200 + 340c= 540Therefore, the consumption is $540.
pantera1 [17]3 years ago
3 0
$540 is the answer in this question. The formula of level of consumption is equal to autonomous consumption plus the disposable income multiplied by the MPC; 
Disposal income = $400
MPC = .85YD
Autonomous consumption = $200

So the solution for this question is 

.85 × 400 + 200 = 540.
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