At a level of real disposable income of $0, suppose consumption is $2,000. Given this information, we know with certainty that saving equals
A) $0.
B) $2,000.
C) -$2,000.
D) -$1,000.

Question

Quizplus · Accepted Answer

Disposable income is calculated by subtracting taxes and transfer payments from total income. If real disposable income is $0 and consumption is $2,000, it means that the person is either borrowing money or using their previously saved money to finance their spending. Therefore, saving would be negative (-$2,000). Option C is the only answer that reflects negative saving.

At a Level of Real Disposable Income of $0, Suppose