The Potter family has a marginal propensity to consume (MPC) of 0.70. If their disposable income...

The Potter family has a marginal propensity to consume (MPC) of 0.70. If their disposable income increases by $500, what happens to their consumption and saving?

Select one:

a. Consumption rises by $700, and saving falls by $200.

b. Consumption rises by $350, and saving falls by $150.

c. Consumption rises by $350, and saving rises by $150.

d. Consumption rises by $700, and saving rises by $300.

e. It depends on their marginal tax rate.

If Canadians expect future disposable income to decrease, then

Select one:

A. Canada's consumption function shifts downward.

B. Canada's consumption function shifts upward.

C. a movement occurs up along Canada's consumption function.

D. a movement occurs down along Canada's consumption function.

E. Canada's saving function shifts downward.

Expert Solution

Rahul Sunny answered 2 years ago

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