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Fact 11.1.1
In an economy, when disposable income increases from $400 billion to $500 billion, consumption expenditure increases from billion to $540 billion.
-Consider Fact 11.1.1.When disposable income increases from $400 billion to $500 billion, saving
A)decreases by an unknown amount.
B)decreases by $60 billion.
C)increases by $60 billion.
D)increases by $40 billion.
E)increases by an unknown amount.

Question

Quizplus · Accepted Answer

When disposable income increases from $400 billion to $500 billion, consumption expenditure increases to $540 billion, indicating that out of the $100 billion increase in disposable income, $140 billion is spent on consumption. This means the remaining $60 billion ($100 billion - $40 billion spent on consumption) represents the increase in savings, making the correct answer an increase of $40 billion in savings.

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