A hypothetical economy's consumption schedule is given in the table below.
GDP=DI |
C |
6600 |
6680 |
6800 |
6840 |
7000 |
7000 |
7200 |
7160 |
7400 |
7320 |
7600 |
7480 |
7800 |
7640 |
8000 |
7800 |
Use the information to answer the following:
a)
at DI = 7400
C = 7320
S = DI - C
= 7400 - 7320
= 80
b)
break even level occures where C = Y (DI)
So at DI = 7000
C = 7000
so DI = C = 7000 is the break even level of DI
c)
MPC = C/
DI(Y)
Y = GDP = DI | C | ![]() |
![]() |
MPC |
6600 | 6680 | |||
6800 | 6840 | 200 | 160 | 0.8 |
7000 | 7000 | 200 | 160 | 0.8 |
7200 | 7160 | 200 | 160 | 0.8 |
7400 | 7320 | 200 | 160 | 0.8 |
7600 | 7480 | 200 | 160 | 0.8 |
7800 | 7640 | 200 | 160 | 0.8 |
8000 | 7800 | 200 | 160 | 0.8 |
So MPC = 0.8
d)
APC = C/DI
at Y = DI = 7000
APC = 7000/7000
= 1
At Y = DI = 8000
APC = 7800/8000
= 0.975
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