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12 August, 10:08

If the consumption function is given by C = 500 + 0.5 (Y - T), and Y is 6,000 and T is given by T = 200 + 0.2Y, then C equals: A) 2,500. B) 2,800. C) 3,500. D) 4,200.

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  1. 12 August, 12:15
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    Answer: Option (B) is correct.

    Explanation:

    Given that,

    Consumption function: C = 500 + 0.5 (Y - T)

    Y = 6,000

    T = 200 + 0.2Y

    T = 200 + 0.2 * 6,000

    = 1,400

    C = 500 + 0.5 (Y - T)

    C = 500 + 0.5 (6,000 - 1,400)

    C = 500 + 2,300

    C = 2,800
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