Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 10

Advanced Analysis Linear equations for the consumption and saving schedules take the general form C = a + bY and S= -a + (1-b)Y where C , S , and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule. LO1, LO2
a. Use the following data to substitute numerical values for a and b in the consumption and saving equations.
b. What is the economic meaning of b ? Of (1 - b )?
c. Suppose that the amount of saving that occurs at each level of national income falls by $20 but that the values of b and (1 - b ) remain unchanged. Restate the saving and consumption equations inserting the new numerical values, and cite a factor that might have caused the change.