For a household, the marginal propensity to save plus the marginal propensity to consume
A) equals a number that is larger the larger the householdʹs disposable income.
B) equals 0.
C) equals 1.
D) equals a number that is smaller the larger the householdʹs disposable income.

Question

Quizplus · Accepted Answer

By definition, the marginal propensity to consume (MPC) is the change in consumption divided by the change in income, while the marginal propensity to save (MPS) is the change in saving divided by the change in income. Therefore, MPC + MPS always equals 1, regardless of the level of disposable income.

For a Household, the Marginal Propensity to Save Plus the Marginal