If saving equals $100 when real disposable income equals $1,000, the break-even income is
A) less than $1,000.
B) greater than $1,000.
C) equal to $1,000.
D) cannot be determined using the above information.

Question

Quizplus · Accepted Answer

The break-even income is the amount of income where spending equals income. Since saving is $100 when real disposable income is $1,000, spending must be $1,000 - $100 = $900. Therefore, the break-even income is the level of income where spending is equal to income, or $900. This is less than $1,000, so the correct answer is A.

If Saving Equals $100 When Real Disposable Income Equals $1,000