If the consumption function can be described as C = 200 + .80Y, the marginal propensity to save is equal to
A) -0.80.
B) 0.80.
C) 0.20.
D) 200.

Name: If the consumption function can be described as C = 200 + .80Y, the marginal propensity to save is equal to A) -0.80. B) 0.80. C) 0.20. D) 200.
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Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is equal to 1 minus the marginal propensity to consume (MPC). Given the consumption function C = 200 + .80Y, the MPC is 0.80, so the MPS = 1 - 0.80 = 0.20.

If the Consumption Function Can Be Described as C =