Question

The Jones family has a disposable income of $90,000 annually. Assume that their marginal propensity to consume is 0.8 (the Jones family spends 80% of new disposable income on consumption) and that their autonomous consumption spending is equal to $10,000. What is the amount of the Jones family\'s annual consumer spending?

Answer 1

The Jones Family has an annual consumer spending of $82,000. This is calculated using this formula: C = A +MD where C is the consumer spending, A is the autonomous consumption spending, M is the marginal propensity to consume, and D is the disposable income. Thus, the calculation is C = $10,000 + (0.8)($90,000). Giving C a value of $82,000.