In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is C = 500+ 0

Economics Dec 03, 2020

In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is C = 500+ 0.6Y Thus, autonomous consumption is - and the marginal propensity to consume is _ . A consumer whose income increases by $100 will increase consumption by $ _ The saving function in this economy is: S+_+_Y

Expert Solution

Autonomous Consumption is 500

MPC = 0.6

If income increases by 100, consumption increases by 0.6*100= 60 units.

S= Y-C = Y- 500-0.6Y

= -500+ 0.4Y (Ans)

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