Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to save:
A)is highest in economy (1).
B)is highest in economy (2).
C)is highest in economy (3).
D)cannot be determined from the data given.

Question

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.The marginal propensity to save:
A)is highest in economy (1). 
B)is highest in economy (2). 
C)is highest in economy (3). 
D)cannot be determined from the data given.

Quizplus · Accepted Answer

The marginal propensity to save is the change in saving divided by the change in disposable income. Looking at the three economies, we can see that economy (1) has the highest level of saving at every level of disposable income, which means that a small increase in disposable income leads to a relatively large increase in saving. Thus, the marginal propensity to save is highest in economy (1).

Following Is Consumption Schedules for Three Private Closed Economies