Which of the following is true?
I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume.
II. personal saving + consumption = gross income
III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in
A) I, II, and III
B) I and II only
C) I and III only
D) II and III only

Question

Which of the following is true? 
I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume.
II. personal saving + consumption = gross income
III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in
A) I, II, and III
B) I and II only
C) I and III only
D) II and III only

Quizplus · Accepted Answer

I is true, as 1 - MPS = MPC is the basic formula for the relationship between marginal propensity to save and marginal propensity to consume.
II is false, as gross income includes not only personal saving and consumption but also taxes and government transfers.
III is true, as the change in disposable income must equal the changes in saving and consumption since disposable income is the amount of income available for consumption and saving after taxes and transfers.

Which of the Following Is True