Answer to Question #279180 in Macroeconomics for adrian

Question

Suppose the marginal propensity to consume (𝑀𝑃𝐶 = 𝑑𝐶⁄𝑑𝑌) is given by 10𝑌 1 5 − 4𝑒 − 1 4𝑌 + 1, where Y is the level of income and C is the level of consumption. When income is 0, consumption is 360. Find the consumption function.

Answer 1

Solution:

Income = consumption + savings 

Savings = Income - consumption 

S = Y - C

Y = level of income = 0

C = level of consumption = 360

savings = - consumption

savings = - 360