The MPC plus the MPS equals
A)0.5
B)the multiplier
C)the slope of the consumption function
D)1.0
E)the slope of the saving function

Question

Quizplus · Accepted Answer

The MPC (marginal propensity to consume) is the fraction of each additional dollar of disposable income that is spent, and the MPS (marginal propensity to save) is the fraction of each additional dollar of disposable income that is saved. Since all disposable income must either be consumed or saved, the MPC plus the MPS must equal 1, or 100%. Therefore, the correct answer is D) 1.0.

The MPC Plus the MPS Equals