Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5
-Refer to Figure 8.5. In this graph, 0.25 represents this society's
A) MPC.
B) MPS.
C) saving function.
D) consumption function.

Question

Refer to the information provided in Figure 8.5 below to answer the questions that follow.  Figure 8.5
-Refer to Figure 8.5. In this graph, 0.25 represents this society's
A) MPC. 
B) MPS. 
C) saving function. 
D) consumption function.

Quizplus · Accepted Answer

0.25 represents the society's MPS (marginal propensity to save) as it indicates that for every $1 increase in income, they are saving $0.25. This can be calculated by dividing the change in saving by the change in income (ΔS/ΔY). None of the other options (MPC, saving function, consumption function) are represented by the value 0.25 in this graph.

Refer to the Information Provided in Figure 8