Consumption function-consumption spending on vertical axis

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Reference no: EM13831123

1) Use the following data to answer the questions below:

Graph the consumption function, with consumption spending on the vertical axis and disposable income on the horizontal axis.

If the consumption function is a straight line, what is its slope?

Fill in the saving column at each level of income. If the saving function is a straight line, what is its slop?

2) Consumption Function How would an increase in each of the following affect the consumptions function?

Net taxes

The interest rate

Consumer optimism or confidence

The price level

Consumers’ net worth

Disposable income

3) For each of the following values for the MPC, determine the size of the simple spending multiplier and total change in real GDP demanded following a $10 billion decrease in spending:

MPC = 0.9

MPC = 0.75

MPC = 0.6

Reference no: EM13831123

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