Multiple Choice
If the Keynesian consumption function is C = 10 + 0.8 Yd then, when disposable income is \$1000, what is the marginal propensity to save?
15. Income and Consumption
Average Propensity to Consume and Save
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If the Keynesian consumption function is C = 10 + 0.8 Yd then, when disposable income is \$1000, what is the average propensity to consume?
A
\$0.8
B
\$800
C
\$810
D
\$0.81
E
Cannot be determined
Verified step by step guidance1
Understand the Keynesian consumption function: C = 10 + 0.8Yd, where C is consumption and Yd is disposable income.
Identify the given disposable income (Yd) which is \$1000.
Substitute Yd = \$1000 into the consumption function to find the total consumption (C). This gives C = 10 + 0.8(1000).
Calculate the total consumption (C) using the substituted value.
Determine the average propensity to consume (APC) by dividing total consumption (C) by disposable income (Yd), i.e., APC = C / Yd.
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