Consider the following consumption function C = (a + 3) +by; 0 < b < 1...
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Consider the following consumption function C = (a + 3) +by; 0 < b < 1 (1) a) Plot (1) in C - Y space, clearly showing the relevant slope and intercept (2 points) b) Average Propensity to Consume (APC) is defined as the ratio of of total consumption with total (disposable) income. Find expressions for both MPC and APC and depict graphically using diagram in a) (4 points) c) Average Propensity to Save (APS) is defined as the ratio of of total savings with total (disposable) income. Derive and draw the savings function (S = Y C) and calculate APS, MPS and depict graphically (4 points) d) "As income increases, people save more" True or False? Prove using graphs in a) and/or c) What if (a + 3 = 0)? (2 points) Consider the following consumption function C = (a + 3) +by; 0 < b < 1 (1) a) Plot (1) in C - Y space, clearly showing the relevant slope and intercept (2 points) b) Average Propensity to Consume (APC) is defined as the ratio of of total consumption with total (disposable) income. Find expressions for both MPC and APC and depict graphically using diagram in a) (4 points) c) Average Propensity to Save (APS) is defined as the ratio of of total savings with total (disposable) income. Derive and draw the savings function (S = Y C) and calculate APS, MPS and depict graphically (4 points) d) "As income increases, people save more" True or False? Prove using graphs in a) and/or c) What if (a + 3 = 0)? (2 points)
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Related Book For
Systems Analysis and Design in a Changing World
ISBN: 978-1305117204
7th edition
Authors: John W. Satzinger, Robert B. Jackson, Stephen D. Burd
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