Question

The table below shows the after-tax income and consumption spending for a nation. a. Calculate the dollar amount of savings, the marginal propensity to consurfe (MPC), and the marginal propensity to save (MPS) for each level of income. Instructions: Enter your answers for savings as a whole number. Round your answers for MPC and MPS to two decimal places. After-Tax Income and Consumption Spending Consumption Spending (dollars) $9,540 After-Tax Income (dollars) $18,700 Savings (dollars) MPC MPS $ 23,640 13,860 19,180 30,725 38,845 24,660 b. Using the data in the table, the MPC (Click to select) and the MPS (Click to select) as income increases.

Answer 1

a) Income = Consumption + Saving

MPC = Change in Consumption / Change in income

MPS = Change in Saving / Change in income

After Tax Income	Change in Income	Consumption	Change in Consumption	Saving	Change in Saving	MPC	MPS
18700	-	9540	-	9160	-	-	-
23640	4940	13860	4320	9780	620	0.87	0.13
30725	7085	19180	5320	11545	1765	0.75	0.25
38845	8120	24660	5480	14185	2640	0.67	0.33

11)

Disposable Income	Change in Income	Consumption	Change in Consumption	Saving	Change in Saving	MPC	MPS
0	-	6000	-	-6000	-
12500	12500	17000	11000	-4500	1500	0.88	0.12
25000	12500	28000	11000	-3000	1500	0.88	0.12
37500	12500	39000	11000	-1500	1500	0.88	0.12
50000	12500	50000	11000	0	1500	0.88	0.12
62500	12500	61000	11000	1500	1500	0.88	0.12

a) Equilibrium level of income is at 50000 when disposable income equals consumption.

b) MPC = 0.88 and MPS = 0.12

c) Autonomous consumption is the consumption level when income is 0. Thus autonomous consumption is 6000.