Table 12-3

-Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to save is
A)0.1.
B)0.4.
C)0.7.
D)0.9.

Question

Table 12-3
 
-Refer to Table 12-3.Given the consumption schedule in the table above,the marginal propensity to save is
A)0.1. 
B)0.4. 
C)0.7. 
D)0.9.

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the fraction of an additional dollar of disposable income that is saved. It is calculated as the change in saving divided by the change in disposable income. Given that the marginal propensity to consume (MPC) is 0.9 (since when income increases, consumption increases by 0.9 of that increase), the MPS is 1 - MPC = 1 - 0.9 = 0.1.

Table 12-3 -Refer to Table 12-3.Given the Consumption Schedule in the Table