On the accompanying graph, draw the consumption function C = $200 + 0.75YD.
(a) At what level of income do households begin to save? Designate that point on the graph with the letter A.
(b) By how much does consumption increase when income raises $200 beyond point A? Designate this new level of consumption with point B.
(c) Illustrate the impact on consumption of the change in consumer confidence described in the News on page 187.

$1,000 900 800 700 600 500 400 300 200- 100 45 O $100 200 300 400 500 600 700 800 900 1,000 DISPOSABLE INCOME ($ billions per year) CONSUMPTION ($ billions per year)