3. The consumption function

Suppose that national income in a country is $300 billion, taxes paid by households are $130 billion, household consumption is $180 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. (9 500 + 450 400 Consumption Function 350 300 250 200 150 CONSUMPTION (Billions of dollars) 100 50 0 | l | l | l | l l | 0 50 100 150 200 250 300 350 400 450 500 DISPOSABLE INCOME (Billions of dollars) Suppose now that country's national income increases to $350 billion. Assuming the amount paid in taxes is fixed at $130 billion and that MPC = 0.7, what will be the new household consumption? $215 billion $249.3 billion $180 billion $250.7 billion