13) Saving equals A) disposable income minus taxes. B) disposable income minus c

Question

13) Saving equals A) disposable income minus taxes. B) disposable income minus consumption spending. C) disposable income minus savings. D) consumption spending minus savings. 14) In the graph for the consumption function, the 45-degree line A) contains only a Consumption component B) represents both Consumption and planned Investment. C) shows various combinations where Consumption equals real disposable income D) reflects a decreasing APC as real disposable income rises. per year 4G 45" oY Y Yo Y Real Disposable Income per Year 15) According to the above figure, planned consumption and income are equal at an income level of A) Y2 B) Y3. C) YI D) Yo 16) According to the above figure, at an income level of Y1. A) the economy saves an amount equal to BD. B) the marginal propensity to save is falling. C) the average propensity to save is greater than one D) the economy dissaves an amount equal to BD.

Explanation / Answer

13. B) Disposable income minus consumption spending.

(Without taxes, disposable income equals national income. Hence, savings is disposable income minus the expenditure on consumption of goods and services)

14. C) Shows various combinations where Consumption equals real disposable income.

15. D) Y0.

(The planned consumption and income intersect at Y0 so that both are equal at this output)

16. D) The economy dissaves an amount equal to BD.

(Because consumption C is greater than income at Y1).

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