Use the following to answer questions .
Exhibit: Consumption and Disposable Personal Income
-(Exhibit: Consumption and Disposable Personal Income) When disposable personal income goes up by $400 billion, personal saving increases by
A) $0.
B) $100 billion.
C) $200 billion.
D) $400 billion.

Question

Use the following to answer questions .
Exhibit: Consumption and Disposable Personal Income 
-(Exhibit: Consumption and Disposable Personal Income) When disposable personal income goes up by $400 billion, personal saving increases by
A) $0. 
B) $100 billion. 
C) $200 billion. 
D) $400 billion.

Quizplus · Accepted Answer

When disposable personal income increases, people tend to save a portion of that increase. If personal saving increases by $200 billion when disposable personal income goes up by $400 billion, it implies a marginal propensity to save of 0.5 (200/400).

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