In a simple, closed economy (no government or foreign sector), if the marginal propensity to save decreases, the marginal propensity to consume will:

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Quizplus · Accepted Answer

In a simple, closed economy, the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) must add up to 1. Therefore, if the MPS decreases, then the MPC must increase to maintain this identity. An increase in MPC means that households are spending a higher proportion of their income on consumption, and thus consuming more.

In a Simple, Closed Economy (No Government or Foreign Sector)