If income increases by $100 and the MPS is 1/4, then the amount saved equals
A)$50
B)$75
C)$25
D)$100
E)$33.33

Name: If income increases by $100 and the MPS is 1/4, then the amount saved equals A)$50 B)$75 C)$25 D)$100 E)$33.33
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Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the fraction of additional income that is saved. If MPS is 1/4, then 1/4 of the $100 increase in income is saved, which equals $25.

If Income Increases by $100 and the MPS Is 1/4