Suppose the mpc in an economy is 0.9. the apc is initially 0.95 and disposable income is $4 billion. if disposable income increases to $14 billion, what is the new level of consumption?

Let us start by calculating the initial level of consumption. The formula for the average propensity to consume is consumption divided by income, therefore you get 0.95 = C / 4bn, giving you the consumption value of 3.8bn at the income of 4bn.

On the other hand, let us calculate the change in consumption. Recall the formula for the marginal propensity to consume being the change in consumption divided by the change in income, therefore you get 0.9 = ΔC/10bn, which gives you the change in income as 9bn. As a result, consumption increases by 9bn, therefore the new level of consumption is 9bn+3.8bn, that being 12.8bn. Hope this helps!

answer(b); ; ; the quantitative or qualitative variable for which the experimenter wishes to determine how its value is affected by the explanatory variable;