1. Problem (1) C = 20 + 0.8 Y Consumption Function I = 100 Investment
Find the following:
1. Marginal Propensity to Consume (MPC):
MPC = 0.8
2. Marginal Propensity to Save (MPS):
MPC + MPS =1
MPS = 1 – MPC
= 1 – 0.8 = 0.2

2. C = 20 + 0.8 Y Consumption Function
I = Investment
3.The Equilibrium Domestic income (Y):
Y = C + I
Y = Y + 100
Y – 0.8 Y = 120
(1- 0.8) Y =
0.2 Y =
Y = 120/0.2 = 600
4. Autonomous Consumption ( ):
= 20
5. Induced Consumption (MPC)Y):
= 0.8 * 600 = 480

3. 6. Consumption at Equilibrium (C):
C = Y Consumption Function
I = Investment
6. Consumption at Equilibrium (C):
C = Autonomous Consumption + Induced Consumption
C = = 500
7. Saving at Equilibrium (S):
S = Y – C = 600 – 500 = 100
S = I

4. 8- show the equilibrium Y graphically?
S AND i S n
100 I
600 Y

5. Problem (2) C = 10 + 0.7 Y I = 50 Find the Following:
1. Marginal Propensity to Consume (MPC)
MPC = 0.7
2. Marginal Propensity to Save (MPS)
MPC = 1 – MPC = = 0.3
3. Autonomous Consumption ( ) = 10
4. Y at equilibrium
Y = C + I
Y = Y + 50
Y – 0.7 Y =
(1 – 0.7 ) Y = 60
0.3 Y = 60
Y = 60 / 0.3 = 200

6. C = Y
I = 50
5. Induced Consumption
= MPC * Y = 0.7 * 200 = 140
6. Total Consumption
= Autonomous Consumption + Induced C.
= = 150
7. Total Saving
S = Y- C
S = 200 – 150 = 50 S= I = 50

7. 8- show the equilibrium Y graphically? n 50 I
200 Y

8. Problem (3) Problem (4) C = 50 + 0.6 Y Find Saving Function Solution
S = Y
Problem (4)
S = Y
Find Consumption Function
Solution
C = Y
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9. Problem (5)