In macroeconomic theory, total consumption expenditure on goods and services, C, is assume to be a linear function of national income, I. The table gives the values of C and I for 2004 and 2009 in country A(in billions of dollars). a. Find the formula for C as a function of 1. b. The slope of the linear function is called the marginal propensity to consume. What is the marginal propensity to consume for country A from 2004-2009? a. FInd the formula for C as a function of I. C=? Year20042013Total consumption (C)$8,289$10,086National income(f)$9,938$12,027

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Let (x1,y1) be the total consumption and Nation income is 2004.  Let (x2,y2) be the total consumption and Nation income in 2009.  Since, we have to write C as a linear function of I, x1=$8,289,y1=$9,938 and x2=$10,086,y2=$12,027.  From this state we arrive at the point (8,289,9,938)(10,086,12,027)  To find slope using two point formula:  m=y2−y1x2−x1 ...(1)  Slope of the linear function is y=mx+b ...(2)  Substitute m=0.9070 in (2)  y=0.9070x+b ...(3)  To find b:  Substitute m=0.9070 and x=$8,289,y=$9,938 in (3)  9,938=0.9070(8,289)+b  b=2419  Substitute m=0.9070 and b=2419 in (3)  y=0.9070x+2419  Express C as an exact linear function of I.  C=0.9070I+2419  Part b):  From part a) slope of the linear function is 0.9070.  Hence, the marginal propensity to consume for country A from 2004-2009 is $0.9070.

In macroeconomic theory, total consumption expenditure on goods and services, C,

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