If the level of consumption is $120 billion and disposable income is $150 billion, then the
A) APC = 0.75 and saving is positive.
B) APC = 0.8 and saving is negative.
C) APC = 0.8 and saving is positive.
D) APC = 0.75 and saving is negative.

Question

Quizplus · Accepted Answer

APC (Average Propensity to Consume) is obtained by dividing consumption (C) by disposable income (Yd).

APC = C/Yd

Given that the level of consumption is $120 billion and disposable income is $150 billion, we can calculate the APC as follows:

APC = 120/150 = 0.8

Furthermore, saving (S) can be obtained by subtracting consumption (C) from disposable income (Yd).

S = Yd - C

S = 150 - 120 = 30

Since saving is positive ($30 billion), the correct choice is C.

If the Level of Consumption Is $120 Billion and Disposable