Question

consumption and saving — work it out
the table below contains data on per - person income and per - person consumption in the united states for several years.

year	income per person	consumption per person
2015	$54,110	$37,102
2016	$54,559	$37,482
2017	$55,373	$38,525
2018	$56,700	$39,400

a. what were savings per person in 2017?
b. what was the marginal propensity to consume (mpc) out of the increase in income from 2017 to 2018?
round your answer to two decimal places.

Explanation:

Step1: Calculate savings per person in 2017

Savings per - person = Income per person - Consumption per person. In 2017, income per person is $55,373 and consumption per person is $38,525. So, savings per person in 2017 is $55373 - $38525=$16848$.

Step2: Calculate the increase in income from 2017 to 2018

Increase in income = Income in 2018 - Income in 2017. Income in 2018 is $56,700 and income in 2017 is $55,373. So, the increase in income is $56700 - $55373 = $1327$.

Step3: Calculate the increase in consumption from 2017 to 2018

Increase in consumption = Consumption in 2018 - Consumption in 2017. Consumption in 2018 is $39,400 and consumption in 2017 is $38,525. So, the increase in consumption is $39400 - $38525=$875$.

Step4: Calculate the marginal - propensity to consume (MPC)

MPC = $\frac{\text{Change in Consumption}}{\text{Change in Income}}$. Substituting the values of change in consumption ($875$) and change in income ($1327$), we get MPC=$\frac{875}{1327}\approx0.66$.

Answer:

a. $16848
b. $0.66