Question #65263
If Mary James' disposable income increases from $32,000 to $33,000 and her level of saving increases from $200 to $325, what is her MPC?
Expert's answer
Mary James' disposable income increased by $ 33000-$32000=$1000 and her level of saving increased by $325-$200=$125, then MPS=$125/$1000= 0.125. So, MPC=1-MPS=0.875.
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#340153 on Dec 2023
#340153 on Dec 2023
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An economy is experiencing a high rate of inflation.The government wants to reduce consumption by $60 billion to reduce inflationary pressure.The MPC is .8. By how much should the government raise taxes to achieve its objective?