If every time disposable income increases by $5 billion,consumption increases by $4 billion and saving increases by $1 billion,the MPC and MPS are,respectively,
A)1/4,1/2
B)1/2,1/2
C)1,0
D)4/5,1/5
E)the answer is indeterminate from the information given

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption divided by the change in disposable income, which is $4 billion / $5 billion = 4/5. The marginal propensity to save (MPS) is the change in saving divided by the change in disposable income, which is $1 billion / $5 billion = 1/5.

If Every Time Disposable Income Increases by $5 Billion,consumption Increases