Use the table below to solve this problem. Level of Output Consumption Saving AP

Question

Use the table below to solve this problem. Level of Output Consumption Saving APC APS MPC MPS And income 1.0167 0.0167 $240 260 280 300 320 340 360 380 400 $244 260 276 2929 308 324 340 356 372 $4 0 4 8 12 16 20 24 28 0.9733 0.9625 0.9529 0.9444 0.9368 1.0000 0.0000 0.9857 0.0143 0.0267 0.0375 0.0471 0.0556 0.0632 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.93000.0700 Suppose the wealth effect is such that $10 changes in wealth produce $1 changes in consumption at each level of income. Assume real estate prices tumble such that wealth declines by $80. (Enter answers as whole numbers.) What will be the new level of consumption at the $340 billion level of disposable income? 1. 2. What will be the new level of saving?

Explanation / Answer

New level of consumption at the $ 340 level of disposable income = 324 - 8 = $ 316

New level of saving = Disposable income - consumption level = 340 - 316 = $ 24

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