20_.Suppose that John earns a disposable annual income of $50,000 and allocates $10,000 of this for necessities. Any additional income beyond that is both spent and saved. If John's MPC is 0.8, how much will he spend on non-necessities?

Question

Quizplus · Accepted Answer

John's disposable income after necessities is $50,000 - $10,000 = $40,000. His MPC is 0.8, which means that he will spend 0.8 of any additional income beyond necessities. Therefore, he will spend 0.8 x $40,000 = $32,000 on non-necessities.

20 Suppose That John Earns a Disposable Annual Income of $50,000

20Suppose That John Earns a Disposable Annual Income of $50,000