If income increases from $3,000 per month to $3,500 per month and savings rise from $200 per month to $400 per month, what is the marginal propensity to save?
A) 1.25
B) 0.8
C) 2.5
D) 0.4

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in income. The change in savings is $400 - $200 = $200, and the change in income is $3,500 - $3,000 = $500. Thus, MPS = $200 / $500 = 0.4.

If Income Increases from $3,000 Per Month to $3,500 Per