1.

If a consumption function of a hypothetical economy is given as: C = 100 + 0.6 Y, then (i) What will be the values of marginal propensity to consume and marginal propensity to save for the economy ? (ii) Write the corresponding saving function.

Answer» (i) C = 100 + 0.6 Y (given)
So, MPC = 0.6
MPS = 1 - MPC = 1-0.6= 0.4
(ii) S = -C+(1-b)Y
S = -100+0.4Y


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