(Advanced analysis) Suppose that the linear equation for consumption in a hypothetical economy is C = 50 + 0.9 Y. Also suppose that income (Y) is $400. Determine the following: (a) MPC; (b) MPS; (c) level of consumption; (d) APC; (e) APS.
What will be an ideal response?
MPC = 0.9; MPS = 0.1; At Y = 400, C = $410; At Y = $400, APC = 410/400 = 1.025; and APS =
(?.025).
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