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The table below shows the after-tax income and consumption spending for a nation. a. Calculate the dollar amount of savings, the marginal propensity to consume (MPC), and the marginal propensity to save (MPS) for each level of income. Instructions: Enter your answers for savings as a whole number. Round your answers for MPC and MPS to one decimal place.

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The dollar amount of savings equals $13,375, the marginal propensity to consume equals 0.9 and the marginal propensity to save equals 0.1.

What is the dollar value of savings?

After-tax income is $23,100, savings is $9,600 ($23,100 − $13,500).

Then when after-tax income is $29,975, savings is $10,975 ($29,975 − $19,00).

Finally, when after-tax income is $37,975, savings is $13,375 ($37,975 − $24,600).

What is marginal propensity to consume?

Because the income increases from $18,100 to $23,100, the amount of extra income is $5,000. Increase in consumption = $4,500 ($13,500 − $9,000). The MPC at this level of income is $4,500/$5,000 = 0.9.

What is marginal propensity to save?

= 1 - MPC

= 1 - 0.9

= 0.1

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