3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households are $12 billion, household consumption is $16 billion, and 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. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 05 10 15 20 25 30 35 40 45 50 DISPOSABLE INCOME (Billions of dollars) Consumption Function ? Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and that MPC = 0.7, what will be the new household consumption? $23.7 billion $19.5 billion $22.3 billion $21.6 billion Grade It Now Save & Continue Continu

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 1.1P
icon
Related questions
Question
Solve all
3. The consumption function
Suppose that national income in a country is $30 billion, taxes paid by households are $12 billion, household consumption is $16 billion, and 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.
CONSUMPTION (Billions of dollars)
50
45
40
35
30
25
20
15
10
5
0
05
10
15
20
25
30
35
40
45
50
DISPOSABLE INCOME (Billions of dollars)
Consumption Function
?
Transcribed Image Text:3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households are $12 billion, household consumption is $16 billion, and 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. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 05 10 15 20 25 30 35 40 45 50 DISPOSABLE INCOME (Billions of dollars) Consumption Function ?
Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and that MPC = 0.7,
what will be the new household consumption?
$23.7 billion
$19.5 billion
$22.3 billion
$21.6 billion
Grade It Now
Save & Continue
Continu
Transcribed Image Text:Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and that MPC = 0.7, what will be the new household consumption? $23.7 billion $19.5 billion $22.3 billion $21.6 billion Grade It Now Save & Continue Continu
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ECON MACRO
ECON MACRO
Economics
ISBN:
9781337000529
Author:
William A. McEachern
Publisher:
Cengage Learning
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
MACROECONOMICS
MACROECONOMICS
Economics
ISBN:
9781337794985
Author:
Baumol
Publisher:
CENGAGE L
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Economics:
Economics:
Economics
ISBN:
9781285859460
Author:
BOYES, William
Publisher:
Cengage Learning