Transcription of UNIT 3 Macroeconomics Answer Key
1 Advanced Placement Economics Teacher Resource Manual National Council on Economic Education,New York, with APC,APS,MPC and MPSPart AAverage PropensitiesThe average propensity to consume(APC) is the ratio ofconsumption expenditures (C) to disposableincome (DI),or APC = C / average propensity to save(APS) is the ratio ofsavings (S) to disposable income,or APS = S / the data in Figure ,calculate the APC and APS at each level ofdisposable income first calculation is completed as an Propensities to Consume and to SaveDisposableIncomeConsumptionSavingAPC APS$0$2,000 $2,000 2,0003,600 1, ,0005,200 1, ,0006,800 ,0008,400 ,00010, ,00011, can savings be negative?
2 Are borrowing or reducing their savings to be able toconsume at the particular level BMarginal PropensitiesThe marginal propensity to consume(MPC) is the change in consumption divided by the change in dis-posable is a fraction ofany change in DI that is spent on consumer goods:MPC = C / marginal propensity to save(MPS) is the fraction saved ofany change in disposable MPS is equal to the change in saving divided by the change in DI:MPS = S / the data in Figure ,calculate the MPC and MPS at each level ofdisposable calculation is completed as an example.(This is not a typical consumption pur-pose is to provide practice in calculating MPC and MPS.)
3 3 MacroeconomicsLESSON 1nACTIVITY 20 AnswerKey UNIT454 Advanced Placement Economics Teacher Resource Manual National Council on Economic Education,New York, 1nACTIVITY 20 AnswerKey UNITF igure Propensities to Consume and to SaveDisposableIncomeConsumptionSavingMPC MPS$12,000$12,100 $100 13,00013, ,00013, ,00014, ,00015, ,00015,6001, must the sum ofthe MPC and MPS always equal 1? The only choice people have is toconsume or to an additional dollar in income must result in a change in consumptionand/or a change in sum ofthe change must be CFigure in APC and MPC as DI IncreasesDisposableIncomeConsumptionSavi ngsAPCAPSMPCMPS$10,000$12,000 $2, 20,00021,000 1, ,00030, ,00039,0001, ,00048,0002, ,00057,0003, ,00066,0004, Figure ,and Answer the questions based on the completed is the APC at a DI level of$10,000?
4 At $20,000? happens to the APC as DI rises? It is the MPC as DI goes from $50,000 to $60,000? From $60,000 to $70,000? happens to MPC as income rises? It remains happens to MPSas income rises? It remains is the conceptual difference between APC and MPC? The APC measures the average con-sumption at any level ofdisposable MPC measures what proportion ofeachadditional dollar ofincome consumers will spend.
