Question

Using the following aggregate expenditures table, answer the questions that follow.

Income (Y), in $	Consumption (C), in $	Saving (S), in $
2,200	2,320	−120
2,300	2,380	−80
2,400	2,440	−40
2,500	2,500	0
2,600	2,560	40
2,700	2,620	80
2,800	2,680	120
2,900	2,740	160
3,000	2,800	200

1. Compute the APC when income equals $2,300 and the APS when income equals $2,800, What happens to APS as your income goes up?
2. Compute the MPC and MPS. Do they change with the change in income?

Answer 1

1) APC when income equals 2300= C/Y

=2380/2300

=1.03

APS when income equals 2800 = S/Y

=0.4285

=0.43

Let's compute APS for all income levels to know what happens to it when income goes up

Its as follows

-0.05

-0.03

-0.02

0

0.02

0.03

0.04

0.06

0.07

APS is increasing with the increase in income

b) MPC and mpc for all levels of income are as follows

Its clear that mpc and MPS doesn't change as income increases. Mpc and mps remains constant.