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Consider a country with the national income of $30 billion, the amount of taxes paid by households of $12 billion, and household consumption of $16
Consider a country with the national income of $30 billion, the amount of taxes paid by households of $12 billion, and household consumption of $16 billion. Suppose that 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. Hint: You should plot the first point where household consumption equals $16 billion. Then, plot the second point when real disposable income rises by $10 billion. (?) 50 Consumption Function REAL CONSUMPTION (Billions of dollars) 0 5 10 15 20 25 30 35 40 45 50 REAL DISPOSABLE INCOME (Billions of dollars) Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and MPC = 0.7, what will be the new household consumption? $21.6 billion O $22.3 billion $19.5 billion O $23.7 billion
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