When the marginal propensity to consume is less than 1, the
A) average propensity to consume is greater than 1.
B) average propensity to save is greater than 1.
C) marginal propensity to save is negative.
D) marginal propensity to save is positive.

Question

Quizplus · Accepted Answer

When the marginal propensity to consume is less than 1, the marginal propensity to save is positive. This means that for every additional unit of income, individuals will save a portion of it rather than spending it all. The average propensity to consume can still be less than 1 if individuals save more than they spend overall. The average propensity to save can also be greater than 1 if individuals save more than they earn.

When the Marginal Propensity to Consume Is Less Than 1