Consider an economy with an autonomous consumption of $4 million, a marginal propensity to consume of 0.6 and a fixed income tax of $1 million, such that disposable income is (Y - 1).< ( a) Define the Consumption Function (in million dollars).< b) What is the marginal propensity to save? c) If real GDP accounts to $6 million, what is the value of consumption?< d) What is the value of private savings? e) Graph the Consumption Function.

Consider an economy with an autonomous consumption of $4 million, a marginal propensity to consume of 0.6 and a fixed income tax of $1 million, such that disposable income is (Y - 1).< ( a) Define the Consumption Function (in million dollars).< b) What is the marginal propensity to save? c) If real GDP accounts to $6 million, what is the value of consumption?< d) What is the value of private savings? e) Graph the Consumption Function.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 4P

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Consider an economy with an autonomous consumption of $4 million, a marginal propensity to
consume of 0.6 and a fixed income tax of $1 million, such that disposable income is (Y− 1).<
a) Define the Consumption Function (in million dollars).<
b) What is the marginal propensity to save?<
c) If real GDP accounts to $6 million, what is the value of consumption?<
d) What is the value of private savings?<
e) Graph the Consumption Function.|/

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