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consumption function

Economics
Tutor: None Selected Time limit: 0 Hours

If the consumption function is C = $300 billion + 0.9Y, how much do consumers spend with incomes of $4 trillion? How much do they save?
Apr 11th, 2015

C = $300 billion 0.9Y

(a) When Y = $4 trillion, C = $[300 (0.9×4000)] billion = $3900 billion. 

Consumers spend $3900 billion with incomes of $4 trillion.

(b) S = Y – C = $(4000 – 3900) billion = $100 billion

They save $100 billion. 

Apr 11th, 2015

C = $300 billion+ 0.9Y

(a) When Y = $4 trillion, C = $[300+ (0.9×4000)] billion = $3900 billion. 

Consumers spend $3900 billion with incomes of $4 trillion.

(b) S = Y – C = $(4000 – 3900) billion = $100 billion

They save $100 billion. 


Apr 11th, 2015

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