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13 January, 10:25

If the consumption function is C = $400 billion + 0.8Y

a) what is the MPC?

b) how large is autonomous C? 400 billion

c) how much do consumers spend with incomes of $4 trillion?

d) how much do they save?

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  1. 13 January, 10:36
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    C = 400 billion + 0.8Y

    a) MPC = 0.8

    b) autonomous C = 400 billion

    c) C = 400 billion + 0.8y = 400 billiob + (0.8 * 4 trillion) = 3.6 trillion

    d) S = - 400 billion + 0.2 (4 trillion) = - 400 billion + 800 billion = 400 billion
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