Question

Becky graduated with a master’s degree in personal financial planning. After working for 2 years in a small financial planning firm, Becky earns $85,000 annually and saves $5,000 a year after spending on her current needs. What is her average propensity to consume?

A. 5 percent
B. 25 percent
C. 60 percent
D. 88 percent
E. 94 percent

Answer 1

Answer:

E. 94 percent

Explanation:

The average propensity to consume = amount spent on consumption/ income

Amount spent on consumption = $85,000 - $5,000 = $80,000

Average propensity to consume = $80,000/$85,000 = 0.9412 = 94%

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