If disposable income rises from $15, 000 to $20, 000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

Question

Quizplus · Accepted Answer

The change in disposable income is $5,000 ($20,000 - $15,000). With a marginal propensity to consume (MPC) of 0.9, consumption increases by $4,500 (0.9 * $5,000). Therefore, saving increases by the remaining $500 ($5,000 - $4,500).

If Disposable Income Rises from $15, 000 to $20, 000