Answer to Question #201751 in Macroeconomics for Hunadi

Question

Use diagrams to illustrate the consumption function (20)

Answer 1

Consumption function defines the relationship between consumption and income. This means that consumption value can be derived at each level with the use of income value.

$C=c+bY$

$C$ =consumption.

$c$ =autonomous consumption.

$b$ =marginal propensity to consume

$Y$ =income