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In the country of Marzipana, total consumption in Year 1 was $56,000 million and in Year 2 was $60,000 million. It has been observed that each time disposable income changes in this country by $100, consumption changes by $70. Using this information compute the change in disposable income from Year 1 to Year 2.
A. Disposable income increased by $2,800 million in Year 2.
B. Disposable income decreased by $2,000 million in Year 2.
C. Disposable income increased by $2,000 million in Year 2.
D. Disposable income increased by $4,500 million in Year 2.
E. Disposable income decreased by $2,600 million in Year 2.

Respuesta :

Answer: A. Disposable income increased by $2,800 million in Year 2.

Explanation:

Disposable income is gotten when the personal current taxes has been deducted from the total personal income of an individual.

Total consumption in year 1 = $56,000 million

Total consumption in year 2 = $60,000 million.

The above shows that there was an increase in total consumption of:

= $60,000 million - $56,000 million

= $4,000 million

From the question, we can also deduce that there's a 0.7 (70/100) change in consumption as a result of a $1 change in disposable income.

Therefore, the increase in the disposable income in year 2 will be:

= $4,000 million × 0.7

= $2,800 million

Therefore, the correct option is A.

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