Question

For an economy, if C = 400 + 0.8 Yd, Yd = Y-T, T = 300 + 0.2Y, find MPC.
(A) 0.93
(B) 0.64
(C) 0.20
(D) 0.81​

Answer 1

Answer:

option C

Explanation:

it's a long process and I don't want to discuss

Answer 2

Answer:

C=400+0.8Yd

Yd=Y-T

T=300+0.2Y

C=400+0.8(Y-T)

=400+0.8[Y-300-0.2Y]

= 400+0.8(0.8Y-300)

=400+0.64Y-240

=400-240+0.64Y

C =160+0.64Y

MPC=dc/dy= 0.64