Table 9.1 $$\begin{array} { | l | c | }
\hline \begin{array} { c }
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c }
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ At which income level does consumption equal income according to the information provided in Table 9.1?
A)$150 billion.
B)$600 billion.
C)$900 billion.
D)$250 billion.

Question

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ At which income level does consumption equal income according to the information provided in Table 9.1?
A)$150 billion.
B)$600 billion.
C)$900 billion.
D)$250 billion.

Quizplus · Accepted Answer

To find the income level where consumption equals income, we need to determine the consumption function based on the given data. The consumption function can be represented as $C = a + bY$, where $C$ is total consumption, $Y$ is disposable income, $a$ is autonomous consumption (consumption when income is zero), and $b$ is the marginal propensity to consume (the change in consumption for a change in income).From the table:- At \$0 income, consumption is \$50 billion, so $a = \$50$ billion.- At \$200 billion income, consumption is \$210 billion.To find $b$, we use the change in consumption and income:$$b = \frac{\Delta C}{\Delta Y} = \frac{210 - 50}{200 - 0} = \frac{160}{200} = 0.8$$The consumption function is $C = 50 + 0.8Y$.To find where consumption equals income ($C = Y$), we set $Y = 50 + 0.8Y$:$$Y = 50 + 0.8Y$$$$0.2Y = 50$$$$Y = \frac{50}{0.2} = 250$$Therefore, at a disposable income level of \$250 billion, consumption equals income.

Table 91 At Which Income Level Does Consumption Equal Income According to \hline

Table 91 At Which Income Level Does Consumption Equal Income According to
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