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    Working with consumption, multipliers, saving and planned investment expenditure.

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    Definitions: c=level of consumer spending
    y=level of income
    s=level of savings

    If C=40+ .5Y

    a. Find the level of consumer spending and the level of savings for the following levels of income: 100, 200, and 300.

    b. What will be the equilibrium level of income when planned investment expenditure is equal to 60?

    c. What is the value of the multiplier?

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    Solution Preview

    a) Since C = 40+ 0.5Y, Saving = Income - Consumption = Y - C and s = S/Y
    When Y = 100, C = 40+ .5*100 = 90 and S = 100 - 90 = 10, so s = 10/100 = ...

    Solution Summary

    The solution concisely answers the questions being asked. Step by step answer is provided. The response makes it easier for students to understand the concept of consumer spending and equilibrium level of income. Overall, a great response.