In the equation C = a + bY, which describes the aggregate consumption function 'b' stands for ?
Correct answer: A. The marginal propensity to consume.
- A. The marginal propensity to consume.
- B. The amount of income when consumption is zero
- C. The average consumption level
- D. The amount of consumption when income is zero
Explanation
In C = a + bY, b measures the increase in consumption caused by an additional unit of income, so it is the marginal propensity to consume. The intercept a represents consumption when income is zero.
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