Answer to Question #110235 in Macroeconomics for Saleem Essack

Question

C=100+0.80Y,what is the savings function in the simple Keynesian model?
1. S=-100+0.20Y
2. S= 100+0.20Y
3. 0.20
4.5

Answer 1

Saving is the rest of income after consumption. So we cam find saving curve:

$S=Y-C=Y-100-0.8Y=0.2Y-100.$

Saving function:

$S = 0.2Y-100.$

So the right answer is 1.