Use the figure below to answer the following questions.

Figure 27.5.2
-Refer to Figure 27.5.2. The equation of the saving function that corresponds to the consumption function in this figure is
A)S = 200 + 0.8YD.
B)S = -200 + 0.8YD.
C)S = 200 + 0.75YD.
D)S = -200 + 0.75YD.
E)S = -200 + 0.25YD.

Question

Use the figure below to answer the following questions.
  
Figure 27.5.2
-Refer to Figure 27.5.2. The equation of the saving function that corresponds to the consumption function in this figure is
A)S = 200 + 0.8YD. 
B)S = -200 + 0.8YD. 
C)S = 200 + 0.75YD. 
D)S = -200 + 0.75YD. 
E)S = -200 + 0.25YD.

Quizplus · Accepted Answer

The saving function is derived from the consumption function. If the marginal propensity to consume (MPC) is 0.75, then the marginal propensity to save (MPS) is 1 - 0.75 = 0.25. The saving function is S = -200 + 0.25YD, where -200 is the autonomous consumption.

Use the Figure Below to Answer the Following Questions