Consider a country with the national income of $300 billion, the amount of taxes paid by households of $130 billion, and household consumption of $180 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 $180 billion, Then, plot the second point when real disposable income rises by $100 billion. RE AL CONSUMPTION (Billions of dollars) 500 450 400 350 300 250 200 150 100 50 + o D 50 100 150 200 250 300 350 400 450 500 REAL DISPOSABLE INCOME (Billions of dollars) о Consumption Function ? Suppose now that country's national income increases to $350 billion. Assuming the amount paid in taxes is fixed at $130 billion and MPC 0.7, what will be the new household consumption? O $250.7 billion O $215 billion O $249.3 billion O $180 billion
Consider a country with the national income of $300 billion, the amount of taxes paid by households of $130 billion, and household consumption of $180 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 $180 billion, Then, plot the second point when real disposable income rises by $100 billion. RE AL CONSUMPTION (Billions of dollars) 500 450 400 350 300 250 200 150 100 50 + o D 50 100 150 200 250 300 350 400 450 500 REAL DISPOSABLE INCOME (Billions of dollars) о Consumption Function ? Suppose now that country's national income increases to $350 billion. Assuming the amount paid in taxes is fixed at $130 billion and MPC 0.7, what will be the new household consumption? O $250.7 billion O $215 billion O $249.3 billion O $180 billion
Chapter9: Aggregate Demand
Section: Chapter Questions
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Transcribed Image Text:Consider a country with the national income of $300 billion, the amount of taxes paid by households of $130 billion, and
household consumption of $180 billion. Suppose that the marginal propensity to consume (MPC) is 0.7. On the
following graph, use the blue line (cincle symbol) to plot the economy's consumption function. Hint: You should plot the
first point where household consumption equals $180 billion. Then, plot the second point when real disposable income
rises by $100 billion. Suppose now that country's national income increases to $350 billion. Assuming the amount paid in
taxes is fixed at $130 billion and MPC = 0.7, what will be the new household consumption? $250.7 billion $215 billion $
249,3 billion $180 billion
Consider a country with the national income of $300 billion, the amount of taxes paid by households of $130 billion, and household consumption of
$180 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 $180 billion. Then, plot the second point when real disposable income rises
by $100 billion.
REAL CONSUMPTION (Billions of dollars)
500
450
400
350
300
250
200
150
100
50
0
D
50 100 150 200 250 300 350 400 450 500
REAL DISPOSABLE INCOME (Billions of dollars)
O
Consumption Function
Suppose now that country's national income increases to $350 billion. Assuming the amount paid in taxes is fixed at $130 billion and MPC = 0.7, what
will be the new household consumption?
O $250.7 billion
O $215 billion
O $249.3 billion
O $180 billion
Transcribed Image Text:Consider a country with the national income of $300 billion, the amount of taxes paid by households of $130 billion, and household consumption of
$180 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 $180 billion. Then, plot the second point when real disposable income rises
by $100 billion.
RE AL 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
REAL DISPOSABLE INCOME (Billions of dollars)
Consumption Function
Suppose now that country's national income increases to $350 billion. Assuming the amount paid in taxes is fixed at $130 billion and MPC = 0.7, what
will be the new household consumption?
O $250.7 billion
O$215 billion
O $249.3 billion
$180 billion
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