The consumption function for a small nation is given by C = 9Y^2 + 25/10Y + 3 , where Y is the nation’s annual income and C is the nation’s annual consumption, both measured in billions of dollars.
a. (What are the nation’s marginal propensities to consume and to save when its annual income is $5 billion.
b. Use your answer to part a. to estimate the changes in consumption and savings when the nation’s income increases from $5 billion to $5.2 billion.
c. Compute lim Y →∞ dC dY and interpret the result in economic terms.