5Consider 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 $300 billion and consumption was $200 billion.On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.CONSUMPTION (Bens of dolar)7006005004003001000100200400600500DISPOSABLE INCOME (Billions of dollars)300700 000101From the preceding data, you know that the level of savings in the economy last year waseconomy isbillion and the marginal propensity to save in thisSuppose that this year, disposable income is projected to be $400 billion. Based on your analysis, you would expect consumption to be sbillion and savings to bebillion.

The marginal propensity to consume (MPC) is 0.50.It means if disposable income rises by $1, then…

Answered: Consider a hypot consumption increases…

Consider a hypot consumption increases by 50€. Suppose further that last year disposable income in the economy was $300 billion and consumption was $200 billion. my in whic

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5
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 $300 billion and consumption was $200 billion.
On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.
CONSUMPTION (Bens of dolar)
700
600
500
400
300
100
0
100
200
400
600
500
DISPOSABLE INCOME (Billions of dollars)
300
700 000
101
From the preceding data, you know that the level of savings in the economy last year was
economy is
billion and the marginal propensity to save in this
Suppose that this year, disposable income is projected to be $400 billion. Based on your analysis, you would expect consumption to be s
billion and savings to be
billion.

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