When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $760 billion. What is the marginal propensity to save?

Question

Quizplus · Accepted Answer

The marginal propensity to save is the change in saving divided by the change in disposable income. In this case, the change in saving is $160 billion ($760 billion - $600 billion) and the change in disposable income is $200 billion ($1,000 billion - $800 billion). Therefore, the marginal propensity to save is $160 billion / $200 billion = 0.80.

When Disposable Income Equals $800 Billion, Planned Consumption Expenditure Equals