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Assume that the private consumption function takes the following form: C=a + b*(Y-T), where a and b are some positive numbers. Assume that b=0.4 and
Assume that the private consumption function takes the following form: C=a + b*(Y-T), where a and b are some positive numbers. Assume that b=0.4 and that government increases personal income taxes by $1 billion.
a) Compute the effect on private consumption
b) Compute the effect on private saving
c) Compute the effect on public saving
d) Compute the effect on national saving
e) Compute the effect on national saving if b=1
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