Let the Consumption Function Be Defined by C = 0

Multiple Choice

Let the consumption function be defined by C = 0.85 + 0.8YDP with permanent disposable income specified according to YDP = 0.75YD + 0.25YD-1) . Which of the following is true?

A) The long-run MPC = 0.85 while the short-run MPC = 0.6.
B) The long-run MPC = 0.8 while the short-run MPC = 0.75.
C) The long-run MPC = 0.8 while the short-run MPC = 0.6.
D) The long-run MPC = 0.8 while the short-run MPC lies somewhere between 0.25 and 0.75.
E) Both the long-run MPC and the short-run MPC equal 0.8.