Graphing the consumption function from the MPC

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.75. That is, if disposable income increases by $1, consumption increases by 75.

Suppose further that last year disposable income in the economy was $500 billion and consumption was $400 billion.

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

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CONSUMPTION (Billions of dollars)

DISPOSABLE INCOME (Billions of dollars)

From the preceding data, you know that the level of savings in the economy last year wasbillionand the marginal propensity to save in this economy is.

Suppose that this year, disposable income is projected to be $700 billion. Based on your analysis, you would expect consumption to bebillionand savings to bebillion.