Question

(1) : (2) : (3)DI - C : DI - C : DI - C$0 - $4 : $0 - $65 : $0 - $210 - 11 : 80 - 125 : 20 - 2020 - 18 : 160 - 185 : 40 - 3830 - 25 : 240 - 245 : 60 - 5640 - 32 : 320 - 305 : 80 - 7450 - 39 : 400 - 365 : 100 - 92Refer to the given consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Suppose that consumption decreased by $2 billion at each level of DI in each of the three countries. We can conclude that thea. marginal propensity to consume will decline in each of the three countries.b. marginal propensity to consume will remain unchanged in each of the three countries.c. average propensity to save will fall at each level of DI in each of the three countries.d. marginal propensity to save will rise in each of the three countries.

Answer 1

Answer: B

The marginal propensity to save will remain unchanged in each of the countries.

Explanation:

Marginal propensity to consume (MPC) is the percentage of increase or decrease in income that goes to consumption

Marginal propensity to save (MPS) is the percentage of increase or decrease in income that goes into savings. It can also be expressed as:

1 - MPC

Average propensity to save measures the level of saving at a given level of income.

The marginal propensity to save measures changes in savings relative to changes in income but the income remains unchanged here, the MPS also remains unchanged.