If a household's disposable income increases from $50, 000 to $100, 000 and its consumption increases from $40, 000 to $80, 000, the MPS must be _____.
A)0.4
B)0.8
C)0.7
D)0.2
E)0.5

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in income. Here, the change in income is $50,000 and the change in consumption is $40,000, so the change in savings is $10,000. MPS = $10,000 / $50,000 = 0.2.

If a Household's Disposable Income Increases from $50, 000 to $100