The marginal propensity to save is defined as
A)saving divided by disposable income.
B)disposable income divided by saving.
C)the change in saving divided by the change in disposable income.
D)the change in disposable income divided by the change in saving.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is defined as the change in saving divided by the change in disposable income. In other words, it measures the fraction of a change in income that is saved, rather than spent. It is calculated as Δsaving/Δincome. Choice (A) is simply the average propensity to save (APS), which is saving divided by disposable income. Choice (B) is the reciprocal of the APS and has no particular economic meaning. Choice (D) is not a meaningful calculation in this context.

The Marginal Propensity to Save Is Defined as