I have a final tomorrow and was hoping someone can explain why the answer is -$600
Given that C = 1000 + 0.60Y, if the level of disposable income is $1000 the level of saving is:?
1000+0.6Y
C=Ae+MPC*Y
Ae-Autonomous expenditures (can't be cut - some sort of minimal poverty level)
MPC - marginal propensity to consume
MPC=1-MPS
MPS- marginal propensity to save (out of disposable income)
Y - disposable income (after taxes)
Consumption can't be negative
1000+0.6*1000=1000+600=1600
But income is only 1000 so it means that person consumes more than earns and 1600-1000=600 is coming from saving.
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