In an economy, for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the:
A) Slope of the saving schedule is 2
B) Slope of the consumption schedule is .8
C) Marginal propensity to consume is .2
D) Average propensity to save is 0.2

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is 0.2, as saving increases by $2 million for every $10 million increase in disposable income. Therefore, the marginal propensity to consume (MPC) is 1 - MPS = 0.8, which is the slope of the consumption schedule.

In an Economy, for Every $10 Million Increase in Disposable