Figure 13-1
-Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by
A) $0.
B) $100 billion.
C) $200 billion.
D) $400 billion.

Question

Figure 13-1 
-Refer to Figure 13-1. When disposable personal income goes up by $400 billion, personal saving increases by
A) $0. 
B) $100 billion. 
C) $200 billion. 
D) $400 billion.

Quizplus · Accepted Answer

According to the consumption function, when disposable personal income increases by $400 billion, consumption will increase by MPC times $400 billion, and saving will increase by MPS times $400 billion. In this case, MPS is 0.5, so personal saving will increase by 0.5 times $400 billion, which is $200 billion.

Figure 13-1 -Refer to Figure 13-1. When Disposable Personal Income Goes Up