A. Given the following income, spending, and savings data, please answer parts a-g below

Disposable Income (DI) Consumption (C) Savings (S)

$ 0 $ 40000 _________

$200000 $200000 _________

$400000 $360000 _________

$600000 $520000 _________

$800000 $680000 _________

1a. Solve for savings at each level of disposable income (DI).

2a. Solve for the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) between each disposable income level.

3a. Solve for the average propensity to consumer (APC) and the average propensity to save (APS) at each level of disposable income.

4a. State the numerical value for the break-even level of disposable income in this example.

5a. State the numerical value for autonomous consumption in this example.

6a. Using the data from the table, graph the consumption line.

7a. Using the data from the table, graph the savings line.

B. Suppose a business owner is trying to decide whether to invest in a new piece of machinery. The machine costs $160,000, and it is expected to generate revenue of $200,000.

1b. Solve for the expected rate of return on this machine.

2b. If the interest rate the business owner has to pay is 20%, will the business owner buy this machine?

3b. If the interest rate the business owner has to pay is 25%, will the business owner buy this machine?

4b. If the interest rate the business owner has to pay is 30%, will the business owner buy this machine?