Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.Suppose that consumption increased by $2 billion at each level of DI in each of the three countries.We can conclude that the:
A)marginal propensity to consume will remain unchanged in each of the three countries.
B)marginal propensity to consume will decline in each of the three countries.
C)average propensity to save will fall at each level of DI in each of the three countries.
D)marginal propensity to save will rise in each of the three countries.

Question

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.Suppose that consumption increased by $2 billion at each level of DI in each of the three countries.We can conclude that the:
A)marginal propensity to consume will remain unchanged in each of the three countries. 
B)marginal propensity to consume will decline in each of the three countries. 
C)average propensity to save will fall at each level of DI in each of the three countries. 
D)marginal propensity to save will rise in each of the three countries.

Quizplus · Accepted Answer

The fact that consumption increases by the same amount at each level of DI suggests that the marginal propensity to consume (MPC) will remain constant in each of the three countries. If the MPC were to decline, we would expect consumption to increase by a smaller amount at higher levels of DI. Additionally, there is no information provided to suggest a change in the average propensity to save (APS) or the marginal propensity to save (MPS). Therefore, the best choice is A.

Following Is Consumption Schedules for Three Private Closed Economies