Figure 13-2
-Refer to Figure 13-2. If real GDP were $12 trillion, consumption equals
A) 5 trillion.
B) 7 trillion.
C) 9 trillion.
D) 11 trillion.

Question

Figure 13-2 
-Refer to Figure 13-2. If real GDP were $12 trillion, consumption equals
A) 5 trillion. 
B) 7 trillion. 
C) 9 trillion. 
D) 11 trillion.

Quizplus · Accepted Answer

In the given graph, the consumption function intersects the 45-degree line at the point where real GDP is $7 trillion. This means that if real GDP were $7 trillion, consumption would be equal to $7 trillion. Since the question asks about consumption when real GDP is $12 trillion, we can use the consumption function to estimate it. The consumption function appears to have a slope of 0.5, so if we add $5 trillion (the distance between $7 trillion and $12 trillion) to the consumption level at $7 trillion, we get an estimated consumption level of $7 trillion (from the intersection point) plus 0.5 x $5 trillion (the slope times the change in real GDP), which equals $9 trillion. Therefore, the best choice is B.

Figure 13-2 -Refer to Figure 13-2. If Real GDP Were $12 Trillion