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What is the value of the vertical intercept and slope of the given equation for the consumption function?

C=A+12YC = A + \frac{1}{2}Y

Solution

✅ Correct Option: 1

The consumption function C=A+12YC = A + \frac{1}{2}Y is linear. The vertical intercept is autonomous consumption AA (consumption when Y=0Y = 0), and the slope is the coefficient of YY, i.e. 12=0.5\frac{1}{2} = 0.5, which is the marginal propensity to consume.

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