If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals
A) -0.6.
B) -0.4.
C) 0.4.
D) 0.6.

Name: If the consumption function is of the form [C = 80 + 0.4Y], the MPS equals A) -0.6. B) -0.4. C) 0.4. D) 0.6.
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Question

Quizplus · Accepted Answer

The Marginal Propensity to Save (MPS) is calculated as 1 minus the Marginal Propensity to Consume (MPC). Given the consumption function C = 80 + 0.4Y, the MPC is 0.4. Therefore, MPS = 1 - 0.4 = 0.6.

If the Consumption Function Is of the Form [C =