Answered

If the consumption function is C= $400 billion + 0.8Y

Awhat is the MPC?
Bhow large is autonomous C? 400 billion
Chow much do consumers spend with incomes of $4 trillion?
Dhow much do they save?

Verified Answer :

Hagrid

C = 400 billion + 0.8Y

a) MPC = 0.8
b) autonomous C = 400 billion
c) C = 400 billion + 0.8y = 400 billiob + (0.8 * 4 trillion) = 3.6 trillion
d) S = -400 billion + 0.2(4 trillion) = - 400 billion + 800 billion = 400 billion

calculista

we know that

The Consumption Function is the relationship between amount consumed and disposable income. A consumption function tells us how much people plan to consume at various levels of disposable income.

in this problem

\(C=\)$@@MATH_TOKEN_1@@

Part a) what is the MPC?

The Marginal Propensity to Consume (MPC) is the ratio of the change in consumption to the change in disposable income

therefore

the MPC is the slope of the Consumption Function line

the answer Part a) is

@@MATH_TOKEN_2@@

Part b) How large is autonomous C?

we know that

Autonomous Consumption is the part of consumption that is independent of or does not depend on the level of disposable income

So

Is the value of C for Y=0

therefore

the answer Part b) is

$\(400billion\)

Part c) how much do consumers spend with incomes of $4 trillion?

\(C= 400billion+0.8Y\)

for \(Y=4trillion\)

\(C= 400billion+0.8*4trillion\)

\(C= 400billion+3.2trillion\)

\(C= 3.6trillion\)

therefore

the answer Part c) is

\(C= 3.6trillion\)

Part d) how much do they save?

\(S = -400 billion + 0.2*(4 trillion)\\ S=-400billion+800billion\\ S=400billion\)

therefore

the answer Part d) is

\(400billion\)

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