If disposable income increases from $250 to $300 and saving increases from $40 to $50,how much is the average propensity to save?
A) 0.133
B) 0.16
C) 0.167
D) 0.2

Question

Quizplus · Accepted Answer

Average propensity to save (APS) is calculated as the ratio of saving to disposable income.
Initial APS = saving/disposable income = 40/250 = 0.16
Final APS = saving/disposable income = 50/300 = 0.167
Change in APS = Final APS - Initial APS = 0.167 - 0.16 = 0.007
Therefore, the average propensity to save has increased by 0.007, which is closest to 0.133. So, the best choice is C.

If Disposable Income Increases from $250 to $300 and Saving