Question

The Disposable income is $400 billion autonomous consumption $ 60 billion, mpc is 0.8 what is the level of saving?
a. $20 billion
b. $210 billion
c. $ 360 billion
d. $200 billion ​

Answer 1

Answer:

a) 20 billion

Explanation:

S = -(a) + (1 - MPC)Y

where,

s = Saving

- (a) = autonomous saving

(1 - MPC) = MPS

Y = INCOME

S = -(60)+(1-0.8)×400

S = 20

Answer 2

When the Disposable income is $400 billion autonomous consumption $ 60 billion, mpc is 0.8 then, the level of saving is $20 billion.

Disposable income = $400 billion

Autonomous consumption = $60 billion

Marginal propensity to consume (mpc) = 0.8

S = -a+Y(1-c)

where, c = marginal propensity to consume

a= autonomous consumption

Y= disposable income

S= saving

⇒ -60+400(1-0.8)

⇒-60+80

⇒20

Saving is $20 billion.

• Remember that we have autonomous expenditure in minus because it is dissaving i.e. money is taken from savings to incur consumption expenditure.