Question no 1

5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50. Suppose further that last year disposable income in the economy was $450 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.Suppose that this year, disposable income is projected to be $650 billion. Based on your analysis, you would expect consumption to be $ billion and saving to be | $ billion.700 O 600 Consumption Function 500 400 300 CONSUMPTION ( Billions of dollars) 200 100 0 -100 0 100 200 300 400 500 600 700 800 DISPOSABLE INCOME (Billions of dollars) From the preceding data, you know that the level of saving in the economy last year was $ billion and the marginal propensity to save in this economy is