The marginal propensity to save is:
A) Equal to (1 + MPC).
B) The fraction of each additional dollar of saving that goes to the stock market.
C) The fraction of each additional dollar of disposable income that goes to saving.
D) (Total savings)÷ (total disposable income).

Question

Quizplus · Accepted Answer

The marginal propensity to save is the fraction of each additional dollar of disposable income that goes to saving. It represents the proportion of an increase in income that is saved rather than spent. Option A is incorrect as it is not related to the definition of the marginal propensity to save. Option B is incorrect as it refers to a specific form of investment rather than saving. Option D is incorrect as it provides the ratio of total savings to total disposable income, which does not capture the incremental change in saving with respect to changes in disposable income.

The Marginal Propensity to Save Is