If the marginal propensity to consume for an economy is 0.8 and the overall income in the economy increases by $1,000, then the total saving in the economy will increase by:
A) $800.
B) $600.
C) $400.
D) $200.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is 0.8, meaning that for every additional dollar of income, 80 cents will be spent and 20 cents will be saved. Therefore, if income increases by $1,000, savings will increase by $200 (20% of $1,000).

If the Marginal Propensity to Consume for an Economy Is