Complete the table. What is the marginal propensity to consume? What is the marginal propensity to save? Draw a graph of the consumption function. Then add the investment function to obtain C+I. Under the graph of C+I, draw another graph that shows the investment and the saving curves. Does the C+I curve cross the 45 degree reference line in the upper graph at the same level of real GDP where the investment and saving curves cross in the lower graph, at the equilibrium real GDP of $8,000? What is the average propensity to save at equilibrium real GDP? The effect on equilibrium real GDP, if the autonomous investment were to rise by $100.

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Chapter 12, Problem 3P

To determine

Complete the table. What is the marginal propensity to consume? What is the marginal propensity to save?

Draw a graph of the consumption function. Then add the investment function to obtain C+I.

Under the graph of C+I, draw another graph that shows the investment and the saving curves. Does the C+I curve cross the 45 degree reference line in the upper graph at the same level of real GDP where the investment and saving curves cross in the lower graph, at the equilibrium real GDP of $8,000?

What is the average propensity to save at equilibrium real GDP?

The effect on equilibrium real GDP, if the autonomous investment were to rise by $100.

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