Let C = 100 + 0

Multiple Choice

Let C = 100 + 0.9YDp) be the consumption function for two people, A and B, with YDp) notationally indicating their view of their permanent income. Summarize that view by defining YDp) = 0.5YD-0) + 0.25YD-1) + 0.25YD-2) with YD-j) notationally representing disposable income lagged j years. If three successive years of disposable income equaling $10,000 were followed by a year of A earning $11,000 and B earning $15,000, then the marginal propensity to consume would equal

A) 0.45 for both A and B.
B) 0.45 for A and 0.4 for B.
C) 0.4 for A and 0.45 for B.
D) 0.9 for both A and B.
E) none of the above.