Question
Consider the following data ( in billions of dollars): Year Real DI Real C Real Wealth...
Consider the following data ( in billions of dollars): Year Real DI Real C Real Wealth 0 700 693 75 1 720 712 77 2 760 746 77 Besides what is listed in the data, no variable that could affect real consumption changes over the time period of this problem. Note : assume that the economy’s MPC does not change over this time period. a.) Solve for the economy’s MPC ( show your work). b.) Place the 3 ( Real DI, Real C ) points ( one corresponding to each year) on a graph, drawing as many different consumption functions as you need ( i.e., each point lies on one consumption function, but any consumption function may contain more than one of the points). Label the points by the year. Don’t worry about drawing the functions to scale or about solving for the exact formulas.
Homework Answers
Answer #1
MPC shows the extra unit consumed with a % rise in the disposable income of a person. The solution to the question is given below:
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