Refer to the Diagram

question 50

Multiple Choice

Refer to the diagram. At disposable income level D, the average propensity to save is equal to

• A) CD/BD.
• B) CD/0D.
• C) 0D/CD.
• D) 0A/0B.

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Definitions:

Interest Rate

The interest rate applied to a loan, frequently shown as an annual percentage of the loan's outstanding figure to the borrower.

Annuity

A level stream of cash flows for a fixed period of time.

Preferred Stock Dividends

Dividends that are paid to preferred stockholders before any dividends are paid to common stockholders.

Perpetuity

A type of annuity that pays an infinite series of cash flows, with the first payment occurring one period from now, indefinitely into the future.