Suppose that disposable income, consumption, and saving in some country are $800

Q: Suppose that disposable income, consumption, and saving in some country are $800

(1) MPC = Change in consumption / Change in disposable income = $56 billion / $80 billion = 0.7 MPS = 1 - MPC = 1 - 0.7 = 0.3 (2) APC = Consumption / Disposable income APC before increase = $700 billion / $800 billion = 0.875 APC after increase = $(700 + 56) billion / $(800 + 80) billion = $756 billion / $880 billion = 0.859

ID: 1190059 • Letter: S

Question

Suppose that disposable income, consumption, and saving in some country are $800 billion, $700 billion, and $100 billion, respectively. Next, assume that disposable income increases by $80 billion, consumption rises by $56 billion, and saving goes up by $24 billion. What is the economys MPC? Its MPS?

Instructions: Round your answers to one decimal place.

MPC =

MPS =

What was the APC before the increase in disposable income? After the increase?

Instructions: Round your answer to two decimal places.

APC before the increase in disposable income =

Instructions: Round your answer to three decimal places.

APC after the increase in disposable income =

Explanation / Answer

(1)

MPC = Change in consumption / Change in disposable income = $56 billion / $80 billion = 0.7

MPS = 1 - MPC = 1 - 0.7 = 0.3

(2)

APC = Consumption / Disposable income

APC before increase = $700 billion / $800 billion = 0.875

APC after increase = $(700 + 56) billion / $(800 + 80) billion = $756 billion / $880 billion = 0.859

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Suppose that disposable income, consumption, and saving in some country are $800

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