Disposable Income 0 50 100 150 200 Saving 10 0 10 20 30 Refe

Disposable Income $0 50 100 150 200 Saving -$10 0 10 20 30 Refer to the given data for a hypothetical economy. The marginal propensity to consume is Multiple Choice 080. 0.80 0.75 0.20 0.25 PART 2.Refer to the given data for a hypothetical economy At the $100 level of income, the average propensity to save is

Solution

The consumption is related to income as:

C = a + cY; where \'c\' is a marginal propensity to consume.

using the values in the table, we get

-10 = a + c(0) => a = -10.

0 = -10 + c(50) => c = 1/5 = 0.2