Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.At an income level of $400 billion, the average propensity to save in economy (2) is:
A).9125.
B).0725.
C).0875.
D).9305.

Question

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.At an income level of $400 billion, the average propensity to save in economy (2) is:
A).9125. 
B).0725. 
C).0875. 
D).9305.

Quizplus · Accepted Answer

At an income level of $400 billion, the consumption expenditure in economy (2) is $348 billion [(0.8 x $400 billion) + $28 billion].

The saving in economy (2) is $52 billion ($400 billion - $348 billion).

The average propensity to save in economy (2) is therefore:

$52 billion (saving) / $400 billion (income) = 0.13

Therefore, the answer is C) 0.0875, which is the closest option to 0.13.

Following Is Consumption Schedules for Three Private Closed Economies