If the marginal propensity to save is 0.2 and income rises by $5,000, how much of this $5,000 will be consumed?
A) $625
B) $1,000
C) $4,000
D) $5,000

Name: If the marginal propensity to save is 0.2 and income rises by $5,000, how much of this $5,000 will be consumed? A) $625 B) $1,000 C) $4,000 D) $5,000
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Quizplus · Accepted Answer

The marginal propensity to save (MPS) is 0.2, meaning 20% of additional income is saved. Therefore, 80% (1 - 0.2 = 0.8) of the income is consumed. So, $5,000 * 0.8 = $4,000 will be consumed.

If the Marginal Propensity to Save Is 0