Homework Answers
(1) (a)
Inflation erodes purchasing power, decreasing consumption, aggregate demand and nominal GDP.
(2) (d)
MPC = Change in consumption (C) / Change in income (Y)
To compute MPC, 2 values for both C and Y must be known.
(3) (b)
MPC = 1 - MPS = 1 - 0.4
(4) (d)
Dissaving happens when consumption is higher than income.
(5) (a)
C = 20 + 0.9 x 800 = 20 + 720 = 740
Saving = Y - C = 800 - 740 = 60
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