Question

Becky graduated with a master degree in Personal Financial Planning. After working two years in a small financial planning firm, Becky earns $60,000 annually and saves $10,000 a year. What is her average propensity to consume?a. 16.7%b. 25.5%c. 75.7%d. 83.3%e. 95.5%

Answer 1

Option D.

Step-by-step explanation:

The average propensity to consume (APC) refers to the ratio of consumption expenditures (C) to disposable income (DI):

APC = C / DI.

From the question, we are given:

Total income = $60,000

Savings = $10,000

Therefore:

Consumption expenditures (C) = 60,000 - 10,000 = $50,000

APC = 50,000 / 60,000

APC = 0.833 or 83.3%