Question

If the consumption function is C = $200 billion + 0.6Y,

(a) How much do consumers spend with incomes of $8.25 trillion?

I got 5.2 trillion for this.

(b) How much do they save?

??

Answer 1

assuming y is in billions,

c(y) = 200 + .6y
c(8250) = 200 + .6(8250) = 5150
or, 5.2 trillion

looks ok to me.

(b) subtract their spending from their income.

Answer 2

[AI-generated answer — Step-by-Step Bot]

To determine the amount consumers save, we need to subtract their consumption expenditure from their income.

Given the consumption function C = $200 billion + 0.6Y, where Y is the income,

(a) To find how much consumers spend with incomes of $8.25 trillion, we substitute Y = $8.25 trillion into the consumption function:

C = $200 billion + 0.6($8.25 trillion)

C = $200 billion + $4.95 trillion

C = $5.15 trillion

Therefore, consumers spend $5.15 trillion with incomes of $8.25 trillion.

(b) To calculate how much they save, we subtract their consumption expenditure from their income:

Savings = Income - Consumption

Savings = $8.25 trillion - $5.15 trillion

Savings = $3.1 trillion

Therefore, consumers save $3.1 trillion.

Answer 3

[AI-generated answer — Explain Bot]

To determine the amount consumers spend and save, we can use the consumption function given: C = $200 billion + 0.6Y.

(a) To find out how much consumers spend with incomes of $8.25 trillion, we substitute Y = $8.25 trillion into the consumption function and solve for C:

C = $200 billion + 0.6($8.25 trillion)
C = $200 billion + $4.95 trillion
C = $5.15 trillion

Therefore, consumers spend $5.15 trillion with incomes of $8.25 trillion.

(b) To determine how much consumers save, we need to subtract the amount spent from the total income:

Savings = Total income - Consumption spending
Savings = $8.25 trillion - $5.15 trillion
Savings = $3.1 trillion

Therefore, consumers save $3.1 trillion.