Given the equation of the consumption function as $C =\bar C + cY$, what does $\bar C$ donate?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → autonomous consumption.
In consumption function $C =\bar C + cY$
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$\bar C$ represents autonomous consumption, i.e., the minimum level of consumption that occurs even when income (Y) is zero.
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It reflects the basic consumption needs financed through past savings or borrowings.