The consumption function for a small nation

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The consumption function for a small nation is given by C = 9Y^2 + 25/10Y + 3 , where Y is the nation’s annual income and C is the nation’s annual consumption, both measured in billions of dollars.

a. (What are the nation’s marginal propensities to consume and to save when its annual income is $5 billion.

b. Use your answer to part a. to estimate the changes in consumption and savings when the nation’s income increases from $5 billion to $5.2 billion.

c. Compute lim Y →∞ dC dY and interpret the result in economic terms.

Reference no: EM131389704

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