If your disposable personal income increases from $30,000 to $40,000 and your savings increases from $2,000 to $4,000, your marginal propensity to save (MPS) is:
A) 0.2.
B) 0.4.
C) 0.5.
D) 0.8.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in disposable income. The change in savings is $4,000 - $2,000 = $2,000, and the change in income is $40,000 - $30,000 = $10,000. Thus, MPS = $2,000 / $10,000 = 0.2.

If Your Disposable Personal Income Increases from $30,000 to $40,000