$$\begin{array} { c c }
\text { Disposable Income } & \text { Consumption } \
0 & \$ 200 \text { billion } \
\$ 200 \text { billion } & 300 \text { billion } \
400 \text { billion } & 400 \text { billion } \
600 \text { billion } & 500 \text { billion } \
800 \text { billion } & 600 \text { billion }
\end{array}$$
-How much is the marginal propensity to save when disposable income rises from $400 billion to $600 billion?

Question

$$\begin{array} { c c } 
\text { Disposable Income } & \text { Consumption } \
0 & \$ 200 \text { billion } \
\$ 200 \text { billion } & 300 \text { billion } \
400 \text { billion } & 400 \text { billion } \
600 \text { billion } & 500 \text { billion } \
800 \text { billion } & 600 \text { billion }
\end{array}$$
-How much is the marginal propensity to save when disposable income rises from $400 billion to $600 billion?

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in saving divided by the change in disposable income. From $400 billion to $600 billion in disposable income, consumption increases from $400 billion to $500 billion, meaning saving increases by $100 billion ($200 billion to $300 billion in saving). The change in disposable income is $200 billion, so MPS = $100 billion / $200 billion = 0.5.

-How Much Is the Marginal Propensity to Save When Disposable