Suppose the consumption function is given by c a byd, Econometrics

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Suppose the consumption function is given by c a byd

Suppose the consumption function is given by C = a + bY_d where a and b are constants (b is the marginal propensity to consume), and Yd is disposable income, equal to Y - T. Taxes vary with income and are equal to t0 + tY where t0 and t are constants (t is the marginal tax rate).

(a) What is the effect on consumption of a $1 change in total income?

(b) What is the effect on saving of a $1 change in total income?

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Econometrics: Suppose the consumption function is given by c a byd

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Econometrics: Suppose the consumption function is given by c a byd

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