Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES BACHELOR OF

SECONDARY EDUCATION – SOCIAL STUDIES
BIÑAN CAMPUS

MACROECONOMICS

MEDALLADA,JENEVA M
BSED SS 2-1
Assignment #4 =37 points Given the economy’s Real Disposable Income (Y), consumption (C) and

saving (S) schedules as follows:

Y (in pesos) C (in pesos) S (in pesos) APC APS MPC MPS

0 80 -80 80 - - -

100 140 -40 1.4 -0.4 0.6 -1.2

200 200 0 1 0 0.6 -0.4

300 260 40 0.87 0.13 0.6 0.4

400 320 80 0.8 0.2 0.6 0.4

500 380 120 0.76 0.24 0.6 0.4

SOLUTIONS:
Answer the following based on the above data:

1.What is the value of autonomous consumption (a) and the value of induced consumption (b)?

State the Consumption equation with these values. (4 pts)

2. What does -P80 at Y =P0, indicate? (3 pts)

Autonomous consumption is defined as consumption that occurs even when disposable income

is zero. If personal consumption, interest, and net current transfers exceed disposable personal

income in a quarter, the personal saving is negative.

3. By how much does the economy save per peso increase in Y? (2 pts)

-The economy save per peso increase in Y is 100.

4. Based on the linear saving function S = -a + 1-bY, state the saving equation using your answers

in #23. (2pts)

5. The Marginal Propensity to Consume (MPC) is the ratio of change in consumption to change in

income. While the Marginal Propensity to Save (MPS) is the ratio of change in Saving to change in

income. Fill-in the blank columns above. (6 pts)

-MPC= 0.6 MPS= -1.2, -0.4, and 0.4

7. Draw the consumption and saving functions together with a 45- degree line in one diagram.

(6 pts)
a. What does this intersection point between C function and 45-degree line indicate? (3pts)

-The solutions to the equation where the output of the C function equals its input value are

represented by the intersection point of a C function and the 45-degree line on a graph.

b. What happen to saving at this income level? (2pts)

-Saving increases as the income level increases.

c. What can you observe on the values of APC and APS at this income level?

What does it mean? (4 pts)

I've noticed that the value of APS increases as income level increases, whereas APC values

decrease as income level increases.