Suppose that disposable income, consumption, and saving in some country are $800 billion, $700 billion, and $100 billion, respectively. next, assume that disposable income increases by $80 billion, consumption rises by $56 billion, and saving goes up by $24 billion. what is the economys mpc? its mps?

instructions: round your answers to one decimal place.

mpc =

mps =

what was the apc before the increase in disposable income? after the increase?

instructions: round your answer to two decimal places.

apc before the increase in disposable income =

instructions: round your answer to three decimal places.

apc after the increase in disposable income =

MPC = 0.7

MPS = 0.3

APC before the increase in disposable income = 0.875

APC after the increase in disposable income = 0.859

Explanation:

Given that,

Disposable income = $800 billion

Consumption = $700 billion

Savings = $100 billion

Further,

Disposable income increases by $80 billion

Consumption rises by $56 billion

Saving goes up by $24 billion

Therefore,

Marginal propensity to consume(MPC):

= Change in consumption level ÷ Change in disposable income

= $56 billion ÷ $80 billion

= 0.7

So, Marginal propensity to save = 1 - MPC

                                                      = 1 - 0.7

                                                      = 0.3

Average propensity to consume(Before increase in disposable income):

= Consumption ÷ Disposable income

= $700 billion ÷ $800 billion

= 0.875

Average propensity to consume(After increase in disposable income):

= Consumption ÷ Disposable income

= ($700 + $56) billion ÷ ($800 + $80) billion

= $756 billion ÷ $880

= 0.859

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