an economys consumption function is depicted in the table below. disposable income yd ($, billions): 0, 100…

an economys consumption function is depicted in the table below. disposable income yd ($, billions): 0, 100, 200, 300, 400, 500. consumption c ($, billions): 100, 170, 240, 310, 380, 450. the economys marginal propensity to save is a. 0.70. b. - 0.033. c. 0.30. d. - 10 billion. the average propensity to consume when the disposable income is $500 billion is equal to a. 0.70. b. 0.90. c. 0.100. d. 0.95.

an economys consumption function is depicted in the table below. disposable income yd ($, billions): 0, 100, 200, 300, 400, 500. consumption c ($, billions): 100, 170, 240, 310, 380, 450. the economys marginal propensity to save is a. 0.70. b. - 0.033. c. 0.30. d. - 10 billion. the average propensity to consume when the disposable income is $500 billion is equal to a. 0.70. b. 0.90. c. 0.100. d. 0.95.

Answer

Explanation:

Step1: Recall the formula for marginal - propensity to save (MPS)

MPS=$\frac{\Delta S}{\Delta Y_d}$. First, find savings $S = Y_d - C$. When $Y_d = 0$, $S_1=0 - 100=- 100$; when $Y_d = 100$, $S_2=100 - 170=-70$. $\Delta Y_d=100 - 0 = 100$, $\Delta S=-70-(-100)=30$. MPS = $\frac{\Delta S}{\Delta Y_d}=\frac{30}{100}=0.30$.

Step2: Recall the formula for average - propensity to consume (APC)

APC = $\frac{C}{Y_d}$. When $Y_d = 500$ and $C = 450$, APC=$\frac{450}{500}=0.90$.

Answer:

The economy's marginal propensity to save is C. 0.30. The average propensity to consume when the disposable income is $500 billion is B. 0.90.