If consumption is 5 trillion when disposable income is 0 and

If consumption is $5 trillion when disposable income is $0, and if the marginal propensity to consume is 0.80, find the national consumption function C(y) (in trillions of dollars).

Solution

C(y) = 0.8y+5

because C\'(y) = marginal propensity to consume and C(0) = consumption when disposable income is 0.

So this gives us the slope and intercept.