Economics
posted by Sally .
Problem #2: A Consumption Function: C = Co + MPC(Yd). Suppose that autonomous consumption is inversely related to the interest rate. It follows that as…
a. interest rate falls, consumption falls
b. interest rate rises, saving falls
c. interest rate rises, consumption falls
d. disposable income rises, autonomous consumption rises
e. none of the above
The answer I learned was C. So does the consumption refer to autonomous consumption.
Autonomous consumption is your Co term. Answer c. is correct; as r rises, Co falls, therefore C falls.
Respond to this Question
Similar Questions

Economics
I need help on some T/F questions. 1. A decrease in the foreign interest rate results in a shift to the left by the IS curve. 2. Home's trade balance surplus must increase as a result of a decrease in Home's interest rate. 3. Since … 
Econ
Need help on this question, I tried the ones i know. a The consumption function is C = 1.5 + 0.75(YT). What is the marginal propensity to consume, MPC? 
Macroeconomics
During the 1990s, the size of the federal government debt became so large that servicing the interest payments became a significant portion of total federal expenditure. In response, many representatives and senators felt that the … 
Macroeconomics
If government spending (G) becomes negatively sensitive to changes in the interest rate, what effect does this have on autonomous consumption and planned investment that is crowded out? 
home economics  PLS help
Need help with some economics problems and wondering if anyone can help. 1 ) Consider a farmer who has access to a bond market where she can borrow or lend at the interest rate R. Assume also that her money holdings (nominal balances) … 
international economic
2.) This question uses the general monetary model, in which L is no longer assumed constant and money demand is inversely related to the nominal interest rate. Consider the same scenario described in the beginning of the previous question. … 
economics
Suppose Caroline is a cinephile and buys only movie tickets. Caroline deposits $3000 in a bank acct that pays an annual interest rate of 20%. You can assume that this interest rate is fixedthat is, it won’t change over time. At … 
Economics
The formula given was: (real rate of interest) = (nominal rate of interest)  (expected rate of inflation) A chartered bank offers a oneyear loan at "3 points above prime." Prime is 4 per cent. a) What is the nominal interest rate? 
macro
Assume that the utility function of a consumer is given by U = ln c1 + ln c2 The interest rate is given by 5% and the endowments are given by (y1, y2) = (100, 120). (a) Draw the budget constraint. (b) Calculate the consumption and … 
economics
suppose Y=100 is fixed,suppose the consumption function is c(YT)=20+M(YT), where M is constant between 0&1,suppose the investment function is I(r)=3050r,suppose we leave G&T as un specified constant.drive equilibrium interest rate&predict …