ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 1.3P
To determine
Graphical representation of consumption function and its slope.
Introduction: Consumption function represents the functional relationship between total consumption and gross
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Suppose that consumption equals $500 billion when disposable income is $0 and that each increase of $100 billion in disposable income causes consumption to increase by $70 billion. Draw a graph of consumption function using this information. What is the slope of the consumption function?
The following graphs show an economy’s initial position at point A along its consumption function (CF).
Suppose disposable income increases.
Adjust the following graph by either shifting the consumption function curve or the initial point on the consumption curve (A) to illustrate the impact of an increase in disposable income.
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