If the marginal propensity to save (MPS) = 0.3, then
A) the MPC = 0.7.
B) the APS = 0.3.
C) the APC = 0.7.
D) consumption equals $700 when income equals $1,000.

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the fraction of any change in income that is saved. Therefore, the Marginal Propensity to Consume (MPC) can be calculated by subtracting the MPS from 1.

MPC = 1 - MPS 
MPC = 1 - 0.3 
MPC = 0.7

Therefore, Choice A is correct, and the MPC = 0.7. The APS (average propensity to save) is the total amount saved divided by total income, which we cannot determine from the given information. The APC (average propensity to consume) is the total amount consumed divided by total income, which would be 0.7 if the MPS is 0.3. The level of consumption cannot be determined solely based on information about the MPS.

If the Marginal Propensity to Save (MPS) = 0