If the marginal propensity to save is 0.25, personal disposable income is £200 and autonomous consumption is £15, what is the level of consumption?
A) £150
B) £165
C) £50
D) £65

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is 0.25, which means the marginal propensity to consume (MPC) is 1 - MPS = 0.75. Consumption is calculated as autonomous consumption + (MPC * disposable income), which is £15 + (0.75 * £200) = £15 + £150 = £165.

If the Marginal Propensity to Save Is 0