Homework answers / question archive / Suppose John gets a sales bonus at his place of work that gives him an extra $600 of disposable income

Suppose John gets a sales bonus at his place of work that gives him an extra $600 of disposable income

Economics

Share With

Suppose John gets a sales bonus at his place of work that gives him an extra $600 of disposable income. He chooses to spend $360 and save the remaining $240. (a.) From this, you can tell that John's marginal propensity to consume (MPC) is (0.60, 0.40, 0.24, or 0.36), and his marginal propensity to save (MPS) is (0.60, 0.40, 0.24, or 0.36). (b.) Mathematically, it must always be true that: Disposable Income = (Consumption + Savings, Consumption - Savings, or Savings - Consumption). (c.) Therefore, it must also be true that: 1 = (MPC - MPS, MPS - MPC, or MPC + MPS). Explain your answers briefly.