In the linear consumption function The (estimated) marginal propensity to consume (MPC) out of income is simply

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In the linear consumption function

The (estimated) marginal propensity to consume (MPC) out of income is simply the slope, , while the average propensity to consume (APC) is

Using observations for 100 families on annul income and consumption (both measured in dollars), the following equation is obtained:

(i) Interpret the intercept in this equation, and comment on its sign and magnitude.
(ii) What is the predicted consumption when family income is $30,000?
(iii) With inc on the x-axis, draw a graph of the estimated MPC and APC.

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Introductory Econometrics A Modern Approach

ISBN: 978-0324660548

4th edition

Authors: Jeffrey M. Wooldridge

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Question Posted: Apr 21, 2016 04:45 AM

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In the linear consumption function The (estimated) marginal propensity to consume (MPC) out of income is simply

Question:

cons -P +Binc cons/inc-B/inc + β cons =-124.84 + 0.853 inc n = 100, R2 = 0.692.

Step by Step Answer:

i The intercept implies that when inc 0 cons is predicted to be ...View the full answer

Introductory Econometrics A Modern Approach

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