If disposable income increases by $100 and saving increased by $25,ceteris paribus,we may conclude that
A)the marginal propensity to consume is 0.25.
B)the marginal propensity to save is 0.25.
C)$15 is autonomous consumption.
D)a change in disposable income is induced by a change in consumption.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the ratio of the change in savings to the change in disposable income. In this case, disposable income increased by $100 and savings increased by $25, indicating that for every $1 increase in disposable income, $0.25 is saved ($25/$100 = 0.25). Therefore, the MPS is 0.25.

If Disposable Income Increases by $100 and Saving Increased by $25,ceteris