If the consumption function is C = 300 +

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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

If the consumption function is C = 300 + 0.6Y, then the savings function will be:

Options:

S = 300 - 0.6Y

S = (-)300 + 0.6Y

S = (-)300 + 0.4Y

S = 300 - 0.4Y

Correct Answer:

S = (-)300 + 0.4Y

Explanation:

We all know that algebraically saving function is written as follows:

S = - c̅ + (1-b)Y

C = 300 + 0.6Y -> Given

According to the question, the savings function will be as follows:

S = (-) 300 + (1 - 0.6)Y

S = (-) 300 + (0.4)Y