In a simple economy (assume there are no taxes: thus, Y is disposable income), t
ID: 1221413 • Letter: I
Question
In a simple economy (assume there are no taxes: thus, Y is disposable income), the consumption function is: C = 200 + 0.80Y. The current level of real GDP is $5000. At this level of real GDP, consumption will be S 4200. and savings will be S 800. If GDP were to increase by $1000, consumption would increase by $ 800. (Round your responses to the nearest dollar.) At a real GDP level of $5000, the average propensity to consume is and the average propensity to save is (Round your answers to two decimal places.)Explanation / Answer
APC=C/Y
=4200/5000
=0.84
APS=S/Y
=800/5000
=0.16