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Unformatted text preview: to introduce a government, taxes are assumed to be equal to zero; consequently, at this point, total income and disposable income are the same; to use symbols from a later assignment, Yd = Y T, but T = 0, so Yd = Y). 1. What is the average propensity to consume (APC)? 2. What is the marginal propensity to consume (MPC)? 3. What is the slope of the Consumption Function? 4. Graph the Consumption Function with C on the vertical axis and Y on the horizontal axis. Suppose that this is a simple economy and that whatever households do not spend on consumption is saved, so that C + S = Y Where S = savings. 5. What is the equation of the Savings Function ? 6. What is the average propensity to save (APS)? 7. What is the marginal propensity to save (MPS)? 8. Graph the Savings Function. 9. What is the value of MPC + MPS in this case? Why does that make sense?...
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- Fall '08