Asked by Kassy Lazcano on May 22, 2024
Verified
When disposable income is 1,000,C + I is
A) 950
B) 1,000
C) 1175
D) 775
Disposable Income
The amount of income left for spending or saving after taxes have been paid.
C + I
Represents the sum of consumer spending (C) and investment spending (I) in an economy's GDP formula.
- Describe the relationship between consumption, investment, and disposable income.
Verified Answer
AT
Ateerin TolbertMay 25, 2024
Final Answer :
C
Explanation :
Disposable income (DI) is the money available to households after deducting taxes. If the disposable income is 1,000, it means that the total amount of money that households have to spend or save is 1,000. C + I refers to consumption and investment spending in the economy. It is not possible to determine the exact value of C + I without additional information such as the marginal propensity to consume or the level of investment in the economy. Therefore, we cannot choose option A, B, or D. However, we can say that the total spending in the economy, which is C + I, is likely to be greater than disposable income since households tend to spend more than they earn by borrowing or using their savings. Therefore, the best choice is option C, 1175, as it is the highest value among the options provided.
Learning Objectives
- Describe the relationship between consumption, investment, and disposable income.