Question

Hint:

Use the formula \( S = Y - C \) to find savings, \( APC = \frac{C}{Y} \) to measure consumption relative to income, and \( MPS = \frac{\Delta S}{\Delta Y} \) to determine the marginal saving rate.

Answer 1

Calculation of Savings: Savings Formula: \( S = Y - C \) where \( C \) is Consumption. At \( Y = 100 \), since \( APC = 1 \)
we get \( C = Y \Rightarrow C = 100 \), so \( S = 100 - 100 = 0 \). At \( Y = 200 \), given \( APC = \frac{3}{4} \) 
we get \( C = \frac{3}{4} \times 200 = 150 \), so \( S = 200 - 150 = 50 \). At \( Y = 300 \), given \( APC = \frac{2}{3} \), we get \( C = \frac{2}{3} \times 300 = 200 \), so \( S = 300 - 200 = 100 \). 
Consumption Function: \( C = 50 + 0.5Y \)