Consumer Spending Calculation Based on Marginal Propensity to Consume
What is the amount of the Wong family's annual consumer spending?
A. $48000
B. $50000
C. $56000
D. $58000
Final answer:
The Wong family's annual consumer spending is calculated by adding autonomous consumption to the product of disposable income and the marginal propensity to consume, resulting in $58,000 (Option D).
Explanation:
The question pertains to the concept of consumer spending based on the marginal propensity to consume (MPC) and autonomous consumption. Given that the Wong family has an annual disposable income of $60,000, an MPC of 0.8, and autonomous consumption of $10,000, we calculate the total consumer spending by adding autonomous consumption to the product of disposable income and MPC:
Consumer spending = Autonomous consumption + (Disposable income × MPC)
Consumer spending = $10,000 + ($60,000 × 0.8)
Consumer spending = $10,000 + $48,000
Consumer spending = $58,000
The correct answer to the amount of the Wong family's annual consumer spending is $58,000, which corresponds to option D.