provide a neat diagram to explain your answer in each question. You are required to answer each question as follows:
1. Give an introduction to the question and explain all key terms
2. Give a graft, label the axes properly and identify all the curves
3. Give a brief description of the changes and outcomes as indicated by the graft.

1. On the graft below, draw the consumption function C=$150+0.8YD.
Consumption is $billions per year.
Disposable income is $100 billion per year.
Answer the following questions:
• At what level of income do households begin to save? Indicate the point on the graph with the letter A.
• By how much does consumption increase when income rises $200 beyond point A? Indicate this new level of consumption with point B.

2. Fiscal and monetary tools are used to fix the macro economy. Briefly explain how might a tax cut affect both AD and AS? (10 marks)