3. The consumption function Suppose that national income in a country is $300 billion, taxes paid by households are $100 billion, household consumption is $160 billion, and the marginal propensity to consume (MPC) is 0.6. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 500 450 400 350 300 250 200 150 100 50 0 0 50 100 150 200 250 300 350 400 450 500 DISPOSABLE INCOME (Billions of dollars) Suppose now that country's national income increases to $330 billion. Assuming the amount paid in taxes is fixed at $100 billion and that MPC = 0.6, what will be the new household consumption? $220.6 billion $178 billion $148 billion Consumption Function O $219.4 billion
3. The consumption function Suppose that national income in a country is $300 billion, taxes paid by households are $100 billion, household consumption is $160 billion, and the marginal propensity to consume (MPC) is 0.6. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 500 450 400 350 300 250 200 150 100 50 0 0 50 100 150 200 250 300 350 400 450 500 DISPOSABLE INCOME (Billions of dollars) Suppose now that country's national income increases to $330 billion. Assuming the amount paid in taxes is fixed at $100 billion and that MPC = 0.6, what will be the new household consumption? $220.6 billion $178 billion $148 billion Consumption Function O $219.4 billion
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 1.1P
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