Assume in country Y, the average marginal propensity to save is 0.2. When the aggregate income is zero, consumers spend 50 to consume. Derive the saving function and consumption function for this country. What happens to consumption when the propensity to save decreases to 0.1? Explain your answer and show this on the graph.

Assume in country Y, the average marginal propensity to save is 0.2. When the aggregate income is zero, consumers spend 50 to consume. Derive the saving function and consumption function for this country. What happens to consumption when the propensity to save decreases to 0.1? Explain your answer and show this on the graph.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 6P

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