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Economy consumption function

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Reference no: EM131293285

Consider a country with the national income of $30 billion, the amount of taxes paid by households of $10 billion, and household consumption of $18 billion. Suppose that the marginal propensity to consume (MPC) is 0.8.

On the following graph, use the blue line (circle symbol) to plot the economy's consumption function.

Suppose now that country's national income increases to $34 billion. Assuming the amount paid in taxes is fixed at $10 billion and MPC = 0.8, what will be the new household consumption?

Reference no: EM131293285

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