ADVANCED ANALYSIS Linear equations for the consumption and saving schedules take the general form C a bY

and S a (1 b)Y, where C, S, and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule.

a. Use the following data to substitute numerical values for a and b in the consumption and saving equations:

b. What is the economic meaning of b? Of (1 b)?

National Consumption Income (Y) (C)
$ 0 $ 80 100 140 200 200 300 260 400 320

c. Suppose that the amount of saving that occurs at each level of national income falls by $20 but that the values of b and (1

b) remain unchanged. Restate the saving and consumption equations for the new numerical values, and cite a factor that might have caused the change.

Level of Output and Income (GDP = DI) Consumption Saving APC APS MPC MPS $ $240 260 280 300 320 340 16 360 20 380 24 400 28 $-4 0 4 8 12