If consumption behavior can be described as C = 50 + .8Y, then the saving function is
A) S = 50 + .2Y.
B) S = -50 + .2Y.
C) S = -50 + .8Y.
D) S = 50 + .8Y.

Question

Quizplus · Accepted Answer

Saving (S) is equal to income (Y) minus consumption (C). Therefore, S = Y - C.
Substituting the consumption function, we get S = Y - (50 + 0.8Y) = -50 + 0.2Y. Thus, the saving function is S = -50 + 0.2Y. Option B is the correct choice.

If Consumption Behavior Can Be Described as C = 50