The marginal propensity to consume plus the marginal propensity to save is

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) and the marginal propensity to save (MPS) are the fraction of a change in income that is spent or saved, respectively. Therefore, by definition, MPC + MPS = 1, which means that if one increases, the other must decrease by the same amount to keep the sum equal to one. For example, if the MPC is 0.7 (meaning that for every additional dollar of income, people spend 70 cents), then the MPS must be 0.3 (meaning that they save 30 cents). Hence, the correct answer is C.

The Marginal Propensity to Consume Plus the Marginal Propensity to Save