If Y = $200 billion,c = 0.75,autonomous consumption = $10 billion,and T = $20 billion,induced saving is
A)$25 billion.
B)$50 billion.
C)$75 billion.
D)$150 billion.

Question

Quizplus · Accepted Answer

Induced saving can be calculated using the formula:

Y = C + I + G + NX
where,
Y = National Income
C = Consumption
I = Investment
G = Government Spending
NX = Net Exports

Rearranging the equation, we get:

C = Y - I - G - NX

Here, autonomous consumption is $10 billion, and induced consumption is given by c(Y-T). So, we can write:

C = 10 + c(Y-T)

Substituting the values given,

Y = $200 billion
c = 0.75
T = $20 billion

C = 10 + 0.75($200 billion - $20 billion)
C = $140 billion

So, induced saving is:

Saving = Y - C - T
Saving = $200 billion - $140 billion - $20 billion
Saving = $40 billion

Therefore, the correct answer is B) $50 billion.

If Y = $200 Billion,c = 0