Suppose an individual's marginal propensity to save is 0.3. If his income increases by £100, by how much will his consumption increase?
A) £30
B) £100
C) £70
D) £3

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is 0.3, meaning 30% of any additional income will be saved. Therefore, 70% of the additional income will be spent on consumption. If income increases by £100, consumption will increase by £70 (100 - 30% of 100).

Suppose an Individual's Marginal Propensity to Save Is 0