In an economy with no taxes or imports,if disposable income decreases by $2 000 and consumption decreases by $1 400,the marginal propensity to save is 0.3.

Question

Quizplus · Accepted Answer

The formula for marginal propensity to save (MPS) is:
MPS = change in savings / change in disposable income
We know that the change in disposable income is $2,000 and the change in consumption is $1,400. Since there are no taxes or imports, the remaining $600 must be the change in savings. Therefore, the MPS is calculated as:
MPS = $600 / $2,000 = 0.3
So, the statement is true.

In an Economy with No Taxes or Imports,if Disposable Income