Question: QUESTION 1) In the fitted linear consumption function Cons = Bo + inc the estimated marginal propensity to consume (MPC) out of income is simple

QUESTION 1) In the fitted linear consumption function Cons = Bo + inc the estimated marginal propensity to consume (MPC) out of income is simple the slope ,, while the average propensity to consume (APC) is cons/inc = Po + B Using observations for 140 families on annual income and consumption (measured in dollars) inc the following equation is obtained: Cons = -124.84 + 0.853inc , n=140, R2=0.692 1) Interpret the intercept and the slope in the equation and comment on its sign and magnitude. 2) What is the predicted consumption when family income is 30.0005? 3) With inc on the x-axis, draw a graph of the estimated MPC and APC. 4) Do you expect consumption and income to be best modelled by a linear function? If not, what other model specifications would you suggest

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