EBK ECON: MACRO4
4th Edition
ISBN: 9781305562097
Author: MCEACHERN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 9, Problem 1.3PA
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?
Construct a consumption function from the data given here and determine the MPC.
Given the consumption function in the above question, what is the relationship between disposable income and consumption? Is it direct or indirect and then explain what it means.
In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is
C= 100 +0.75Y
Investment is equal to 400.
In this economy, equilibrium GDP is $
(Round your answer to the nearest dollar)
1.) Using the point drawing tool, on the graph to the right, indicate the real GDP point that you found above Label the point 'E'
2) Using the line drawing tool, carefully graph the consumption plus investment line Properly label your line
Carefully follow the instructions above, and only draw the required objects
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