When consumption function is C = 100 + 0.65 Y, then savings function will be? |
S = 100 + 0.35 Y S = -100 + 0.65 Y S = -100 + 0.35 Y S= 75 + 0.35 Y |
S = -100 + 0.35 Y |
From the consumption function given in the question, we can see that autonomous consumption is 100 and MPC = 0.65, so MPS = 0.35. So, savings function is expressed as negative autonomous consumption + MPS * Income Also, C + S = Y S = Y - C S = Y - (100 + 0.65Y ) S = Y - 100 - 0.65Y S = -100 + 0.35Y |