AP Macro- Voss
1. (pg 559 #5)
Complete the accompanying table.
(GDP = DI)
Consumption
Name:
Consumption & Savings Practice
Saving
APC
APS
MPC
MPS
$240
$ _____
$-4
_____
_____
_____
_____
260
$ _____
0
_____
_____
_____
_____
280
$ _____
4
_____
_____
_____
_____
300
$ _____
8
_____
_____
_____
_____
320
$ _____
12
_____
_____
_____
_____
340
$ _____
16
_____
_____
_____
_____
360
$ _____
20
_____
_____
_____
_____
380
$ _____
24
_____
_____
_____
_____
400
$ _____
28
_____
_____
_____
_____
a. Show the consumption and saving schedules graphically.
b. Find the break-even level of income. Explain how it is possible for households to dissave at very low
income levels.
c. If the proportion of total income consumed (APC) decreases and the proportion saved (APS)
increases as income rises, explain how the MPC and MPS can be constant at various levels of income.
2. A hypothetical economy's consumption schedule is given in the table below.
GDP=DI
6600
6800
7000
7200
7400
7600
7800
8000
Use the information to answer the following:
a.
b.
c.
d.
C
6680
6840
7000
7160
7320
7480
7640
7800
If disposable income were $7400, how much would be saved?
What is the "break-even" level of disposable income?
What is this economy's marginal propensity to consume? Marginal propensity to save?
What is the average propensity to consume (APC) and average propensity to save (APS) when
disposable income is $7000? When disposable income is $8000?