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

Planned saving = Disposable income - Planned consumption expenditure
At $800 billion disposable income, planned saving = $800 billion - $600 billion = $200 billion
At $1000 billion disposable income, planned saving = $1000 billion - $760 billion = $240 billion
Change in disposable income = $1000 billion - $800 billion = $200 billion
Change in saving = $240 billion - $200 billion = $40 billion
Marginal propensity to save = Change in saving / Change in disposable income
= $40 billion / $200 billion
= 0.20

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