To calculate:
The level of consumption expenditure at each level of disposable income, to identify over what range of disposable income is there dissaving and to estimate the level of disposable income as which saving is zero.
Explanation of Solution
Dissaving occurs when the disposable income is zero, since the individual does not have income for their expenditure on goods and services, as a result the individual will not save a single percentage of dissaving. They are able to spend on goods and services by borrowing or purchasing goods on credit. Savings are zero when the disposable income accounts to $25 trillion, that is, in between $20 trillion and $30 trillion where disposable income equals consumption expenditure, savings account to zero.
Disposable Income | Saving | Consumption Expenditure |
0 | -5 | 5 |
10 | -3 | 7 |
20 | -1 | 19 |
30 | 1 | 29 |
40 | 3 | 37 |
50 | 5 | 45 |
Disposable income:
Disposable income is the level of income that is available for individuals to spend on goods and services after deducting mandatory taxes, interests and social securities.
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Chapter 30 Solutions
Foundations of Economics (8th Edition)
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