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In: Economics

If Autonomous Savings is $0 , what is the specific consumption function if the MPC is...

If Autonomous Savings is $0 , what is the specific consumption function if the MPC is 0.80 and what is the specific consumption function if the MPC is 0.67?

Expert Solution

Consumption function

C=a+bY

a is autonomous consumption

b is slope

Y is income

Saving function

S= -a+sYd

As it can be seen in the consumption and saving function, a is autonomous consumption and –a is autonomous saving.

Since value of a is given zero.

a=0

When MPC=0.80

C=a+0.8Yd

C=0+0.8Yd

C=0.8Yd

When MPC=0.67

C=a+0.67Yd

C=0+0.67Yd

C=0.67Yd

Rahul Sunny answered 2 years ago

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