If the marginal propensity to save is 0.6,then the marginal propensity to consume is

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the proportion of additional income that an individual saves rather than consumes. Therefore, if the MPS is 0.6, it means that for every additional dollar of income, the individual saves 60 cents and consumes 40 cents.

The marginal propensity to consume (MPC) is the proportion of additional income that an individual consumes rather than saves. Since income must either be saved or consumed, the MPC and MPS are complements and sum to 1. Hence, the MPC is 1 - MPS, which in this case is 1 - 0.6 = 0.4.

Therefore, the correct answer is B) 0.4.

If the Marginal Propensity to Save Is 0