Explain what is the economic meaning of b

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Reference no: EM13218736

Linear equations for the consumption and saving schedules take the general form: C = a + bY and S = - a + (1 - b)Y where C, S, and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule.

a. Use the following data to substitute specific numerical values into the consumption and saving equations. National Income (Y) Consumption (C) $ 0 $ 100 200 290 400 480 600 670 800 860 Instructions: If you are entering any negative numbers, be sure to include a negative sign (-) in front of those numbers. C = $ Y S = $ Y

b. What is the economic meaning of b? What is the economic meaning of (1-b)?

c. Suppose that the amount of saving that occurs at each level of national income falls by $20 but that the values of b and (1 - b) remain unchanged. Restate the saving and consumption equations inserting the new numerical values. Instructions: If you are entering any negative numbers, be sure to include a negative sign (-) in front of those numbers. C = $ Y S = $ Y

Reference no: EM13218736

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