Which of the following is true?
A) MPC - MPS = 1
B) MPC + MPS = 1
C) MPC * MPS = 1
D) MPC / MPS = 1

Question

Quizplus · Accepted Answer

The correct formula for the relationship between MPC (marginal propensity to consume) and MPS (marginal propensity to save) is MPC + MPS = 1. This means that the total income earned will either be consumed or saved. Any increase in MPC will lead to a decrease in MPS and vice versa. Therefore, the sum of the two must always be equal to 1. Choice A is incorrect because subtracting MPC from MPS will not necessarily equal 1. Choice C is incorrect because multiplying MPC and MPS will not necessarily equal 1. Choice D is incorrect because dividing MPC by MPS will not necessarily equal 1.

Which of the Following Is True