Using the equation( C= a + bY) where Y= GDP = C= 100 + .8Y Fill...
Using the equation( C= a + bY) where Y= GDP = C= 100 + .8Y
Fill out the table below
___________________________________________________________________________
GDP Consumption Savings
0
100
200
300
400
500
600
700
800
Using graph paper plot the function C= 100+ .8Y (see figure 12-3 and 12-4 and 12-6). You should plot both axis in the same denomination (if one square= 100 on the vertical, 1 square will also equal 100 on horizontal axis). Include a 45 degree reference line showing equilibrium between the vertical and horizontal axis. The consumption function will cross the 45 degree line at equilibrium.
At the bottom of the graph, plot the savings function.
Homework Answers
| GDP (Y) | Consumption (C= 100 + .8Y) | Saving = Y - C |
| 0 | 100 | -100 |
| 100 | 180 | -80 |
| 200 | 260 | -60 |
| 300 | 340 | -40 |
| 400 | 420 | -20 |
| 500 | 500 | 0 |
| 600 | 580 | 20 |
| 700 | 660 | 40 |
| 800 | 740 | 60 |
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