Asked by Jaydan MacMaster on Jul 23, 2024
Verified
Refer to Table 22.5. Which of the following consumption functions best fits the values in the table?
A) C = 8 + 0.5Y
B) C = 3 + 0.75Y
C) C = 4 + 0.9Y
D) C = 5 + 0.8Y
Aggregate Income
The total income earned by all individuals or entities in an economy, including wages, profits, rents, and investment earnings, over a specific time period.
Aggregate Consumption
The total amount of goods and services consumed in an economy over a specific period.
Consumption Function
A relationship in economic terms between the gross national income and the aggregate consumption level.
- Investigate the most effective and ineffective alignments for consumption mechanisms based on the data presented.
Verified Answer
DN
Danielle NearyJul 28, 2024
Final Answer :
A
Explanation :
The consumption function C = 8 + 0.5Y fits the values in the table when you calculate consumption (C) for each level of aggregate income (Y) using this formula. For example, when Y = 6, C = 8 + 0.5(6) = 11, which closely matches the pattern in the table, considering a possible rounding or transcription error in the question's provided table.
Learning Objectives
- Investigate the most effective and ineffective alignments for consumption mechanisms based on the data presented.