Assume that the economy includes only consumers and businesses, and is in equilibrium with income equal to $6 million and consumption spending equal to $5 million. Which statement is correct?
A) Investment is $1 million.
B) There is no saving in this economy.
C) The economy will go into disequilibrium because consumption is not equal to income.
D) The marginal propensity to consume is 0.83.

Question

Quizplus · Accepted Answer

Since income equals consumption spending ($6 million = $5 million), there is no saving in this economy. Therefore, the remaining $1 million must be investment spending.

Assume That the Economy Includes Only Consumers and Businesses, and Is