If aggregate income is N500.00 and aggregate consumption is N400.00, this means that the average propensity to consume is?

  • A 0.20
  • B 0.80
  • C 1.25
  • D 2.00
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The correct answer is B. 0.80

The Average Propensity to Consume (APC) is calculated as the ratio of total consumption to total income. In this case, it would be calculated as follows:

\(APC = \frac{\text{Aggregate Consumption}}{\text{Aggregate Income}} = \frac{N400.00}{N500.00} = 0.80\)

So, the correct answer is option B: 0.80.

This means that for every Naira earned, 80 kobo is spent on consumption.

The remaining 20 kobo would be saved, assuming there are no other expenditures.

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