-Refer to Exhibit 10-9.What is the value of the marginal propensity to save (MPS)that would correctly fill in blank (E)and the multiplier that would correctly fill in blank (F)?
A) 0.012; 0.83
B) 0.12; 88
C) 0.15; 15
D) 0.15; 6.67

Question

-Refer to Exhibit 10-9.What is the value of the marginal propensity to save (MPS)that would correctly fill in blank (E)and the multiplier that would correctly fill in blank (F)?
A) 0.012; 0.83 
B) 0.12; 88 
C) 0.15; 15 
D) 0.15; 6.67

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the complement of the marginal propensity to consume (MPC). If MPC is 0.85 (as it might be suggested in the context), then MPS = 1 - MPC = 1 - 0.85 = 0.15. The multiplier (k) is calculated as 1/(1-MPC) or 1/MPS, which gives us 1/0.15 = 6.67.