If you earn an additional $200 in disposable income one week for feeding your neighbor's ferret,
A) the total of your consumption and saving will increase by more than $200.
B) the total of your consumption and saving will increase by $200.
C) the total of your consumption and saving will increase by less than $200.
D) your consumption will increase by more than $200, even if your MPS is 0.1.

Question

Quizplus · Accepted Answer

Disposable income is the income that remains after taxes have been deducted from gross income. If you earn an additional $200 in disposable income, your total income has increased by $200. Since disposable income is the income that can be either consumed or saved, the total of your consumption and saving will also increase by $200. Therefore, the correct option is B.

If You Earn an Additional $200 in Disposable Income One