If there is a decrease in disposable income in an economy, then
A) both the APC and the APS rise.
B) the APC rises and the APS falls.
C) the APC falls and the APS rises.
D) both the APC and the APS fall.

Question

Quizplus · Accepted Answer

When disposable income decreases, consumers tend to spend a larger proportion of their income to maintain their standard of living, causing the Average Propensity to Consume (APC) to rise. Conversely, the Average Propensity to Save (APS) falls because they have less income to save.

If There Is a Decrease in Disposable Income in an Economy