Answer to Question #280767 in Macroeconomics for Angela

Question

You are given data for a hypothetical simple closed economy;

C= 250+0.85Y

I= 150

G=200

Where C is consumer expenditure, Y is national income, G is government expenditure on goods and services and I is investment expenditure. All amounts are in K million.

1. Derive a savings function using the information for the hypothetical economy

Answer 1

S=Y-C

Y=C+I+G=250+0.85Y+150+200

0.15Y=600

Y=4000

$C=250+0.85\times4000=3650$

S=4000-3650=350