Table 9.1 $$\begin{array} { | l | c | }
\hline \begin{array} { c }
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c }
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ What is the marginal propensity to save in Table 9.1?
A)0.05.
B)0.80.
C)0.20.
D)0.24.

Question

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ What is the marginal propensity to save in Table 9.1?
A)0.05.
B)0.80.
C)0.20.
D)0.24.

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in disposable income. From the table, when disposable income increases from $0 to $200 billion, consumption increases from $50 to $210 billion. This means savings increase from -$50 billion (since consuming more than income) to -$10 billion (since $200 income - $210 consumption). The change in savings is $40 billion ($-10 billion - (-$50 billion)). The change in disposable income is $200 billion. Thus, MPS = $40 billion / $200 billion = 0.20.

Table 91 What Is the Marginal Propensity to Save in Table 9