The marginal propensity to save
A) exceeds 1.
B) is negative if dissaving is present.
C) is between 0 and 1.
D) equals 1.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is defined as the ratio of the change in savings to the change in income. Therefore, it can never be negative or greater than 1. An MPS of 1 would mean that individuals save all of their additional income, which is not realistic. MPS is usually between 0 and 1, indicating that a portion of additional income is saved and the rest is spent.

The Marginal Propensity to Save