Question

Suppose you have the following disposable income and consumption data for an economy, as shown in the table below.
a. Using this data, compute the value for savings at each level of disposable income.
Instructions: Include a negative sign (-) when necessary.
Disposable Income Consumption Savings
$20,000 $22,000 $?
21,000 22,500 ?
22,000 23,000 ?
23,000 23,500 ?
24,000 24,000 ?
25,000 24,500 ?
26,000 25,000 ?
27,000 25,500 ?
28,000 26,000 ?

Answer 1

Answer:

Consumption is a key component in the calculation of GDP and refers to how much money out of disposable income is spent by households on goods (both durable and non-durable) and services.

Disposable income is how much money households have after taxes. Their consumption and spending come from here.

Whatever is not spent is saved. Savings are therefore calculated as;

Savings = Disposable income - Consumption

Savings for the above are therefore,

$20,000 - $22,000 = -$2,000

21,000 - 22,500 = -$1,500

22,000 - 23,000 = -$1,000

23,000 - 23,500 = -$500

24,000 - 24,000 = $0

25,000 - 24,500 = $500

26,000 - 25,000 = $1,000

27,000 - 25,500 = $1,500

28,000 - 26,000 = $2,000