Consider a country with the national income of $30 billion, the amount of taxes paid by households of $12 billion, and household consumption of $16 billion. Suppose that the marginal propensity to consume (MPC) is 0.7. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Hint: You should plot the first point where household consumption equals $16 billion. Then, plot the second point when real disposable income rises by $10 billion. REAL CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 229 15 5 0 D 5 10 15 20 25 30 35 40 46 REAL DISPOSABLE INCOME (Billions of dollars) 60 Consumption Function
Consider a country with the national income of $30 billion, the amount of taxes paid by households of $12 billion, and household consumption of $16 billion. Suppose that the marginal propensity to consume (MPC) is 0.7. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Hint: You should plot the first point where household consumption equals $16 billion. Then, plot the second point when real disposable income rises by $10 billion. REAL CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 229 15 5 0 D 5 10 15 20 25 30 35 40 46 REAL DISPOSABLE INCOME (Billions of dollars) 60 Consumption Function
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 13SQ
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