Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1
-Refer to Figure 8.1. [-500 + 0.5Y] is this household's
A) MPC.
B) MPS.
C) saving function.
D) consumption.

Question

Refer to the information provided in Figure 8.1 below to answer the questions that follow.  Figure 8.1
-Refer to Figure 8.1. [-500 + 0.5Y] is this household's
A) MPC. 
B) MPS. 
C) saving function. 
D) consumption.

Quizplus · Accepted Answer

[-500 + 0.5Y] represents the saving function of the household, indicating how much the household will save at different income levels. It is not the MPC (marginal propensity to consume) or MPS (marginal propensity to save) as those refer to the change in consumption or saving for a given change in income. It is also not the consumption as that would be represented as [Y - (-500 + 0.5Y)] or [0.5Y + 500].

Refer to the Information Provided in Figure 8