If the marginal propensity to save is 0.2, then
A)the marginal propensity to consume is larger than 0.8.
B)the marginal propensity to consume is 0.8.
C)the marginal propensity to consume is also 0.2.
D)the slope of the consumption function is 0.2.
E)the slope of the saving function is 0.8.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Save (MPS) + Marginal Propensity to Consume (MPC) equals 1. If MPS is 0.2, then MPC must be 0.8 (1-0.2=0.8). Therefore, the answer is B.

If the Marginal Propensity to Save Is 0