1. Graphing the consumption function from the MPCConsider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1,consumption increases by 50¢.Suppose further that last year disposable income in the economy was $400 billion and consumption was $300 billion.On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.CONSUMPTION (Billions of dollars)7006005004003002001000-100O0O100200 300 400 500600DISPOSABLE INCOME (Billions of dollars)700800Screenshot From the preceding data, you know that the level of savings in the economy last year was $economy isSuppose that this year, disposable income is projected to be $500 billion. Based on your analysis, you would expect consumption to bebillion and savings to be $billion.$billion and the marginal propensity to save in thisScreenshot

Consumption Function is a function of disposable income and the latter is the income which is…

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $300 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. (Billions of dollars) 700 600 500 400 300 (?

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $300 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. (Billions of dollars) 700 600 500 400 300 (?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 10E

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Question

1. Graphing the consumption function from the MPC
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1,
consumption increases by 50¢.
Suppose further that last year disposable income in the economy was $400 billion and consumption was $300 billion.
On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.
CONSUMPTION (Billions of dollars)
700
600
500
400
300
200
100
0
-100
O
0
O
100
200 300 400 500
600
DISPOSABLE INCOME (Billions of dollars)
700
800
Screenshot

From the preceding data, you know that the level of savings in the economy last year was $
economy is
Suppose that this year, disposable income is projected to be $500 billion. Based on your analysis, you would expect consumption to be
billion and savings to be $
billion.
$
billion and the marginal propensity to save in this
Screenshot

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