Question: Assume that the aggregate consumption function takes the form: C = 150 + 0.7 Y Assume further that the investment level is 30 and is

Assume that the aggregate consumption function takes the form:

C = 150 + 0.7 Y

Assume further that the investment level is 30 and is independent of output level,

Use this information to fill out the following table and answer the questions below:

AggregateConsumptionSavingInvestment Aggregate

IncomeExpenditure

0

200

400

600

800

1000

a.What is the equation for the aggregate saving function?

b.Calculate MPC and MPS. Interpret their meanings?

c. What is the equilibrium income on the table above?

d. Calculate the equilibrium income mathematically

e. Calculate the expenditure multiplier. Explain its meaning

f. If investment spending declines by $100 billion, what is the expected change in the equilibrium income?

g. If the marginal propensity to save is 0.40, then a $10,000 decrease in disposable income will change consumption by how much?

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