Suppose the consumption equation is represented by C = 380 + 0.75YD, the propensity to save is:

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The propensity to save is the amount by which income exceeds consumption, divided by income. Mathematically, it is expressed as MPS (marginal propensity to save) = change in saving/change in income. In this case, the consumption function is represented as C = 380 + 0.75YD. YD is disposable income which is calculated by subtracting taxes from income, i.e., YD = Y - T. So, the average propensity to consume (APC) is 0.75 (given) and the average propensity to save (APS) is 1 - APC = 1 - 0.75 = 0.25. Therefore, the propensity to save is 0.25 or 25%. Option A represents this value.

Suppose the Consumption Equation Is Represented by C = 380