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Aggregate Demand, Consumption & Saving · Question 39 of 60

Question 39

HardOriginal question

At an income of ₹1,000 crore, the APC is 0.9. Income rises to ₹1,200 crore and consumption rises by ₹160 crore. The new APC is

0.8Correct answerYour answer0.88Correct answerYour answer0.9Correct answerYour answer1.06Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

Old C = 0.9 × 1,000 = 900; new C = 900 + 160 = 1,060.
New APC = 1,060 ÷ 1,200 ≈ 0.88. (The MPC is 160 ÷ 200 = 0.8.)

Worth noting

0.8 is the MPC over the change, not the new APC.

Concept: APC after a rise in income
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsAPC, MPC, APS and MPS

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