Suppose the economy's saving schedule shifts from S₁to S₂as shown in the below diagram.We can say that its: A)MPC has increased. B)MPS has increased. C)APS has increased at all levels of disposable income. D)APS has decreased at all levels of disposable income.

Question

Quizplus · Accepted Answer

Since the saving schedule has shifted towards the right, this means that at each level of disposable income, there will be a higher level of savings. This implies that the marginal propensity to consume (MPC) has decreased, as individuals are tending to save more of their disposable income. Therefore, the correct answer is B, as the shift in the saving schedule indicates an increase in the marginal propensity to save (MPS), not an increase in MPC or APS.

Suppose the Economy's Saving Schedule Shifts from S1to S2as Shown

Suppose the Economy's Saving Schedule Shifts from S₁to S₂as Shown