Question: (a) Interpret the intercept in this equation, and comment on its sign and magnitude. (b) What is the predicted consumption when family income is $30,000?

(a) Interpret the intercept in this equation, and comment on its sign and magnitude.

(b) What is the predicted consumption when family income is $30,000?

3. (Wooldridge, Ch2, Problem 5) In the linear consumption function 072753 + 30 + 611710 the (estimated) marginal propensity to consume (MPC) out of income is simply the slope, 131, While the average propensity to consume (APC) is ems 60 A inc inc Using observations for 100 families on annual income and consumption (both measured in dollars), the following equation is obtained 0371's = 124.84 + 0.853inc N = 100, R2 = 0.692

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