1 Consumption function worksheet

https://classroom.google.com/u/0/w/NTA4ODI1NDExOTc3/tc/NTA4ODI1NDExOTg4

1. Consumption Functions

We are given the following equations from the Keynesian Model, find the autonomous consumption level, marginal propensity to consume (MPC) and marginal propensity to save (MPS). Additionally, find the savings function with respect to disposable income.

Note: Remember when we have the consumption function in the form C = Co + cY , autonomous consumption is Co and the marginal propensity to consume is c. The savings function with respect to disposable income is S = So + sY where So is dissavings and s is the marginal propensity to save (MPS).

1. If C = 125 + 0.75Y
2. Autonomous Consumption Level :
3. MPC :
4. MPS :
5. Savings Function
6. If Y = 500, What is the total consumption and savings?
7. If S = -50 + 0.2Y
8. Autonomous Consumption Level :
9. MPC :
   10. MPS :
   11. Write the Consumption Function
   12. If Y = 2000, What is the total consumption and savings?

c) Equilibrium

Solve for the short run equilibrium output using the Keynesian Model.

Use the fact that Output = Y = C + I + G + X – M in equilibrium.

C = Consumption function = 125 + 0.75Y

G = Government Spending = 100

I = Investment Spending = 120

X = Exports = 100

M = Imports = 80

2) Tables, Functions, & Equilibrium (Challenging Problems)

Given the information in the following table, fill the blanks (assuming that the consumption function is linear with respect to disposable income). Find the consumption function with respect to disposable income, the savings function with respect to disposable income. Then find the equilibrium output level in a closed economy if G = 50 and I = 100

1. Write the consumption function from the table above
2. Write the savings function from the table above
3. What is the MPC?
4. What is the MPS?
5. Graph the consumption and savings function in the space below