5 In the linear consumption function cons 5 b 0 1 b 1inc, the (estimated) marginal propensity to consume (MPC) out of income is simply

5 In the linear consumption function cons 5 bˆ 0 1 bˆ 1inc, the (estimated) marginal propensity to consume (MPC) out of income is simply the slope, bˆ 1, while the average propensity to consume (APC) is cons/inc 5 bˆ 0/inc 1 bˆ 1. Using observations for 100 families on annual income and consumption (both measured in dollars), the following equation is obtained: cons 5 2124.84 1 0.853 inc n 5 100, R2 5 0.692. (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.