A famous theory in economics developed by John Maynard Keynes states that consumption expenditures are a linear equation of disposable income. An economist wishes to develop a model that relates income and consumption and obtains the following information. In 2010 personal disposable income was $7199 billion and personal consumption expenditures were $6732 billion. In 2015 personal disposable income was 9523 billion and personal consumption expenditures were $9262 billion. A.) find a linear equation that relates personal consumption expenditures, y, to disposable income, x.
B.) In 2013, personal disposable income was 9743 billion. Use this information to predict personal consumption expenditures in 2013.
C.) Interpret the slope as a rate of change in the context of the problem. In economics
, this slope is called the marginal propensity to consume.
d.) If personal consumption expenditures were $9528 billion what do you think do you think the disposable income was?