The sum of the marginal propensity to consume (MPC)and the marginal propensity to save (MPS)equals:
A)0.5.
B)the multiplier.
C)the slope of the consumption function.
D)1.0.
E)the slope of the saving function.

Question

Quizplus · Accepted Answer

By definition, the marginal propensity to consume (MPC) is the change in consumption divided by the change in income, and the marginal propensity to save (MPS) is the change in saving divided by the change in income. Therefore, MPC + MPS = (change in consumption/change in income) + (change in saving/change in income) = (change in consumption + change in saving)/change in income = change in income/change in income = 1. Therefore, the correct answer is D) 1.0.

The Sum of the Marginal Propensity to Consume (MPC)and the Marginal