Assume in a simple economy that the level of saving is 800 when aggregate output equals zero

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Assume in a simple economy that the level of saving is –800 when aggregate output equals zero and that the marginal propensity to save is 0.25. Derive the saving function and the consumption function, and draw a graph showing these functions. At what level of aggregate output does the consumption curve cross the 45-degree line? Explain your answer and show this on the graph.

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Principles of Macroeconomics

ISBN: 978-0134078809

12th edition

Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster

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