Becky graduated with a master's degree in personal financial planning. After working for 2 years in a small financial planning firm, Becky earns $85,000 annually and saves $5,000 a year after spending on her current needs. What is her average propensity to consume?
A) 5 percent
B) 25 percent
C) 60 percent
D) 88 percent
E) 94 percent

Question

Quizplus · Accepted Answer

Becky's average propensity to consume (APC) is calculated by dividing her consumption by her income. If she earns $85,000 annually and saves $5,000, she spends $80,000 ($85,000 - $5,000). Therefore, her APC is $80,000 / $85,000 = 0.9412, or 94.12%, rounded to 94 percent.

Becky Graduated with a Master's Degree in Personal Financial Planning