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Aggregate Demand, Consumption & Saving · Question 20 of 60

Question 20

HardOriginal question

The consumption function is C = 50 + 0.8Y. At what income is saving zero?

Options for question 20

Show the answer and explanation
CorrectNot quiteAnswer C

Correct answer: C

Explanation

  1. Saving is zero where C = Y: Y = 50 + 0.8Y.

  2. 0.2Y = 50, so Y = ₹250 crore.

Worth noting

₹62.5 crore divides 50 by 0.8 instead of by 0.2, the MPS.

Concept
Break-even income
Typical time
100 s
Your time
—
The rule this testsThe consumption function
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