The following table is a consumption schedule. Assume taxes and transfer payment
ID: 2494732 • Letter: T
Question
The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving.
(GDP = DI)
C
S
APC
APS
1500
$1540
$_____
1.027
–.027
1600
1620
_____
1.013
–.013
1700
1700
_____
_____
_____
1800
1780
_____
.989
.011
1900
1860
_____
.979
.021
2000
1940
_____
_____
_____
2100
2020
_____
.962
.038
2200
2100
_____
_____
_____
Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.
The break-even level of disposable income is $________.
As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.
The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.
(GDP = DI)
C
S
APC
APS
1500
$1540
$_____
1.027
–.027
1600
1620
_____
1.013
–.013
1700
1700
_____
_____
_____
1800
1780
_____
.989
.011
1900
1860
_____
.979
.021
2000
1940
_____
_____
_____
2100
2020
_____
.962
.038
2200
2100
_____
_____
_____
Explanation / Answer
GDP = DI)
C
S
APC
APS
1500
$1540
$ -40
1.027
–.027
1600
1620
-20
1.013
–.013
1700
1700
0
1
0
1800
1780
20
.989
.011
1900
1860
40
.979
.021
2000
1940
60
0.97
0.03
2100
2020
80
.962
.038
2200
2100
100
0.95
0.05
The break-even level of disposable income is $1700.
As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $80 by $100, and is equal to 0.8.
The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $20 divided by $100, or to 0.2.
GDP = DI)
C
S
APC
APS
1500
$1540
$ -40
1.027
–.027
1600
1620
-20
1.013
–.013
1700
1700
0
1
0
1800
1780
20
.989
.011
1900
1860
40
.979
.021
2000
1940
60
0.97
0.03
2100
2020
80
.962
.038
2200
2100
100
0.95
0.05