Exhibit 10-4

-The MPS in the economy represented in Exhibit 10-4 is
A)0
B)0.1
C)0.2
D)0.8
E)20

Question

Exhibit 10-4
 
-The MPS in the economy represented in Exhibit 10-4 is
A)0 
B)0.1 
C)0.2 
D)0.8 
E)20

Quizplus · Accepted Answer

The MPS (marginal propensity to save) is calculated by dividing the change in savings by the change in income. In this case, when income increases from $100 billion to $200 billion, consumption increases from $80 billion to $150 billion, which means savings increase from $20 billion to $50 billion. Therefore, MPS = ΔS/ΔY = (50-20)/(200-100) = 0.2

Exhibit 10-4 -The MPS in the Economy Represented in Exhibit 10-4 Is