1. Graphing the consumption function from the MPC
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.80. That is, if disposable income increases by $1,
consumption increases by 80¢.
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.