Assuming that Yd = $10,000 and C = $12,000, we would find that the average propensity to save equals
A) 0.8.
B) 1.2.
C) -0.2.
D) -0.8.

Question

Quizplus · Accepted Answer

The average propensity to save (APS) is calculated as the ratio of saving to income. If Yd = $10,000 and C = $12,000, then saving (S) = Yd - C = $10,000 - $12,000 = -$2,000 (negative value because C > Yd). Therefore, APS = S/Yd = -$2,000/$10,000 = -0.2. This means that, on average, the individual is saving 20 cents of every dollar they receive as income. The negative value indicates that they are actually dissaving, meaning they are spending more than their income.

Assuming That Yd = $10,000 and C = $12,000, We