# Quiz 10: Basic Macroeconomic Relationships

a. Disposable income is divided into consumption and saving. The table is reproduced as follows: APC is average propensity to consume. Its formula is as follows: APS is the average propensity to save. Its formula is as follows: MPC is the marginal propensity to consume. Its formula is as follows: MPS is the marginal propensity to save. Its formula is as follows: The table is reproduced as follows: b. Break-even level of income is the income which equals to consumption. In this question the break-even level of income is \$260. At the \$240 level income consumption is higher than income and saving is negative. The economic term for this situation is dissaving. c. As income changes, MPS and MPC are constant, whereas APC and APS are variables. APC increases as income increases and APS decreases as income increases.
MPC is the marginal propensity to consume. It measures the change in consumption caused by the change in income. MPS is the marginal propensity to save. Its formula is as follows: APC is average propensity to consume. Its formula is as follows: After the increase of income APC is calculated as follows: 