The marginal propensity to save equals the
A) change in savings from a change in consumption expenditure.
B) change in savings resulting from a one dollar change in disposable income.
C) average amount of income saved.
D) ability to save the same percentage of income each month.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) measures the change in savings resulting from a one dollar change in disposable income. This means that for every additional dollar of income, how much is saved. It is not necessarily an average amount of income saved, nor does it necessarily reflect the ability to save a certain percentage each month. While changes in consumption expenditure may affect savings, it is not the definition of the MPS.

The Marginal Propensity to Save Equals the