Suppose the economy's saving schedule shifts from S₁ to S ₂ as shown in the below diagram.We can say that its: A) MPC has increased. B) MPS has increased. C) APS has increased at all levels of disposable income. D) APS has decreased at all levels of disposable income.

Question

Quizplus · Accepted Answer

The saving schedule shift from S₁ to S₂ indicates an increase in savings at each level of disposable income. Since MPS (marginal propensity to save) is the ratio of change in savings to change in income, an increase in savings implies an increase in MPS. Therefore, the correct answer is B, MPS has increased.

Suppose the Economy's Saving Schedule Shifts from S1 to S

Suppose the Economy's Saving Schedule Shifts from S₁ to S