Assume that an econometric study of the U.S. economy resulted in the following consumption schedule for the year 1992.
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DISPOSABLE INCOME PLANNED CONSUMPTION
($ billions) ($ billions)
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100 75
300 225
500 375
900 (?)
1,000 750
Answer the following questions based on the consumption schedule shown above:
1. What will be the level of planned savings if disposable income is $500 billion? __________________________________________
2. How large is the marginal propensity to consume? __________
3. If the level of planned saving in $250 billion, what will be the level of disposable income? ______________________________
4. What will be the level of planned consumption if disposable income is equal to $900 billion? _____________________________
5. Does the average propensity to consume decrease as disposable income increases? __________________________________________
6. If consumption is the only type of planned spending, what will be the equilibrium level of income? _________________________