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Explain the components of the equation `C=bar(C )+bY`

Answer» Consumption function formulaC = cbar + b YdThe Keynesian consumption function expresses the level of consumer spending depending on three factors.Yd = disposable income (income after government intervention – e.g. benefits, and taxes)a or c bar = autonomous consumption (consumption when income is zero. (e.g. even with no income, you may borrow to be able to buy food))b = marginal propensity to consume (the % of extra income that is spent). Also known as induced consumption.


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