What is the change in a) consumption and b) change in savings, if with a marginal...
What is the change in a) consumption and b) change in savings, if with a marginal propensity to consume (MPC) of 73%, real disposable income (Yd) increases from $215 to $295? Answer:
Homework Answers
This is given that a marginal propensity to consume (MPC) of 73%,
MPC=0.73
real disposable income (Yd) increases from $215 to $295
When Yd=215
C=MPC*Yd
=0.73*215
=156.55
Saving=Yd-C
=215-156.55
=58.05
When Yd=295
C=MPC*Yd
=0.73*295
=215.35
Saving=Yd-C
=295-215.35
=79.65
Change in consumption=215.35-156.55
=58.8
Change in saving=79.65-58.05
=21.60
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