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Question 1

Average Consumption (AC)

Answer 1

Total consumption / Income

Question 2

Average saving (AS)

Answer 2

Total savings / income

Question 3

Maringal Propensity To Consume

Answer 3

Change in total consumption / change in income

Question 4

Maringal Propensity To Save

Answer 4

Change in total saving / change in income

Question 5

Consumption Function

Answer 5

C = a + by

Autonomous consumption (a) -> Expenditure when income = 0

Induced consumption (by) -> The proportion of consumption that varies with disposable income

Question 6

Savings Function

Answer 6

S = sY - a

Autonomous dissaving (a) -> Proportion of savings people will draw on when income = 0

Induced saving (sY) -> Proportion of saving that varies with disposable income

Question 7

Wealth effect

Answer 7

The change in consumption following a change in wealth