The following table provides data for output real GDP and sa

The following table provides data for output (real GDP) and saving. a Fill in the missing numbers (gray-shaded cells) in the table. Instructions: in the table, round your answers to 3 decimal places f you are entering any negative numbers be sure to in negative sign (-) in front of those numbers Level of Output and Income (GDP DI) $480 Saving S-32 16 APC APS 512 0.938 0.063 0.973 16 32 48 0.027 640 680 632 760 0.880 0 120

Solution

a.

- MPC = change in consumption / change in DI

MPC = 536 - 512 / 520 - 480

MPC = 24 / 40 = 0.6

MPC = 0.6

- Marginal propensity to save (MPS) = 1 - MPC

MPS = 1- 0.6 = 0.4

MPS = 0.4

b) Break even level of income is where DI + consumption or in other words, APC = 1 also we can save saving = 0

so in the table this level of income where income = consumption and APC = 1 is $560

Break- even level of income = $560

- Saving situation at the $240 levle of income is \'Dissaving\'.

Explaination : It is so because even at income level $480, there is dissaving as the income is not sufficient for the minimum consumption also. So the level of income below $480 have the same situation of dissaving as income is not sufficient for consumption and people use their own savings for consumption. Thats why it is dissaving.

C)

- The MPS is Constant as income changes

Explaination : At all level of income MPS is 0.4

MPS = change in saving / change in income

MPS at $520 level of income = - 16 - (-32) / 520 - 480 = 0.4

at $560 level of income = 0 - (-16) / 560 - 520 = 0.4

similarly at all level MPS is 0.4 so constant.

- APC is variable as shown in the table it is different for different level of income.

- MPC is constant because MPS is constant.

and MPC = 1- MPS.

IF mps at all level is 0.4 so mpc is also 0.6 at all level of income.

- Aps is also variable as shown in the table.

Level of OUtput and Income (GDP = DI)	Consumption	Saving (DI - Consumption)	APC = C/Y	APS = S/Y
480	512	-32 (480 - 512)	1.067	-0.067
520	536	-16	1.031	-0.031
560	560	0	1	0 ( break - even level of income)
600	584	16	0.973	0.027
640	608	32	0.95	0.05
680	632	48	0.929	0.071
720	656	64	0.911	0.089
760	680	80	0.895	0.105
800	704	96	0.88	0.12