You have the following information on personal consumption expenditures (C) and disposable income (Yd):
Year C Yd
1 300 400
2 500 700
a. Compute the marginal propensity to consume.
b. Compute the amount of savings for years 1 and 2.
c. Compute the marginal propensity to save.
a. MPC = ?C/?Yd = 200/300 = 0.667
b. Year 1: S = Yd - C = 400 - 300 = 100
Year 2: S = Yd - C = 700 - 500 = 200
c. MPS = ?S/?Yd = 100/300 = 0.333
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