Which of the following statements is true of the relationship between marginal propensity to consume (MPC) and marginal propensity to save (MPS)?
A) MPC + MPS = -1
B) MPC + MPS = 0
C) MPC + MPS = 1
D) MPC + MPS 1

Question

Which of the following statements is true of the relationship between marginal propensity to consume (MPC) and marginal propensity to save (MPS)?
A) MPC + MPS = -1
B) MPC + MPS = 0
C) MPC + MPS = 1
D) MPC + MPS >1

Quizplus · Accepted Answer

MPC + MPS = 1 because the marginal propensity to consume (MPC) represents the proportion of an additional unit of income that is spent, while the marginal propensity to save (MPS) represents the proportion of an additional unit of income that is saved. Together, they account for all additional income, hence their sum equals 1.

Which of the Following Statements Is True of the Relationship