1.Suppose the consumption function in the U.S. is represented by the following equation (where B represents billions)

C = 200B + 0.8Y_D

A.What is the value of the MPC?____8_______

B.What is the level of autonomous consumption? ____________

C.What is the level of consumer spending when income is equal to $1200B?

D.What is the level of consumer spending if income increases by $400B?

2.You are given the following information about the economy of Zeeland: Autonomous consumption is $50 billion, and the marginal propensity to consume is 0.9.

A.Write out the economy of Zeeland's consumption function in equation form. (Use my reporting of the consumption function in #1 as your example.)

B.By how much would consumer spending increase if income in Zeeland rose by $20 billion?

INCOMEC

$1300$1290

13101298

1320 1306

1330 1314

1340 1322

1350 1330

1360 1338

1370 1346

1380 1354

1390 1362

1400 1370

4.The above table reports values for consumer income and spending (in billions of dollars)

A.Based on your understanding of the equation for the MPC that you picked up from the screencast, calculate the MPC using the data above.

B.Now that you have the MPC, choose any level of C and Y_D from the data above, and calculate the level of autonomous consumption.

C.Now that you have calculated both the MPC and the level of autonomous consumption, write out the consumption function in equation form as you did in #2.

D.Using the equation in your response to C. above, calculate the level of consumer spending when income is equal to $1800B?.