Question

Suppose disposable income increases by $2,000. As a result, consumption increases by $1,500. Answer the questions based on this information. Where appropriate, enter your answer as a decimal rather than as a percentage. The increase in savings resulting directly from this change in income is ________.

Answer 1

The answer is $500

Step-by-step explanation:

Disposable income is the income left after deduction of tax and other statutory deductions. It is income that a worker receives.

Increase in tax reduces disposable income and vice-versa.

Disposable income increases by $2,000 while spending increases by $1,500.

In finance, money not spent is saved. So we have

$500($2,000 - $1,500) as the amount saved.

$500 is the increase in saving.