Chapter 16, Problem 3MCQ

To determine

The question requires us to determine the value of aggregate consumption spending.

Explanation of Solution

Given,

Current disposable income = $2 trillion

Consumption spending function, $\text{C=\$1}\text{.6}\text{trillion+0}{\text{.5Y}}_{\text{D}}$

The aggregate consumption spending is:

  $\begin{array}{c}\text{C = \$1}\text{.6}\text{trillion+0}{\text{.5Y}}_{\text{D}}\\ \text{= \$1}\text{.6}\text{+trillion+}\left(\text{0}\text{.5×\$2}\text{trillion}\right)\\ \text{= \$1}\text{.6}\text{+trillion+\$1}\text{trillion}\\ \text{= \$2}\text{.6}\text{trillion}\end{array}$

The value of aggregate consumer spending is $2.6 trillion.

So, option “b” is correct.