If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $2,000, saving will increase
A) $100.
B) $200.
C) $300.
D) $400.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the fraction of an increase in disposable income that is saved. If MPS is 0.4 and disposable income increases by $1,000 (from $1,000 to $2,000), the increase in saving is 0.4 * $1,000 = $400.

If the Marginal Propensity to Save Is 0