1 graph the consumption and savings functionsc , Microeconomics

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1 graph the consumption and savings functionsc

1. Graph the consumption and savings functions:

C = 100 + 0.6Y and S = -100 + 0.4Y

a) What is the equilibrium level of national income?

b) If autonomous investments of 150 occurred, graph the new C + I function of AD = 250 + 0.6Y.

c) What is the new equilibrium level of national income?

d) What is the value of the investment multiplier?

2. Suppose that in an economy a $40m increase in consumption leads a $200m increase in national income. Calculate the value of this economy's marginal propensity of save. (Show working).

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Microeconomics: 1 graph the consumption and savings functionsc

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