Which of the following equations is correct for an economy that does not have a government or a foreign sector?
A)MPC x MPS = 1
B)MPC/MPS = 1
C)MPC - MPS = 1
D)MPC + MPS = 1

Question

Quizplus · Accepted Answer

In an economy without a government or a foreign sector, the only components are consumption and savings. The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) is equal to 1, as all income must be either consumed or saved. Therefore, option D, MPC + MPS = 1, is the correct equation.

Which of the Following Equations Is Correct for an Economy