If consumption is $13,000 when income is $12,000, and consumption increases to $15,000 when income increases to $15,000, the MPS is
A) -0.15.
B) 0.
C) 0.33.
D) 0.40.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Save (MPS) is calculated as the change in savings divided by the change in income. Here, when income increases from $12,000 to $15,000 (a change of $3,000), consumption increases from $13,000 to $15,000 (a change of $2,000). The change in savings is therefore $1,000 ($3,000 - $2,000), and the MPS is $1,000 / $3,000 = 0.33.

If Consumption Is $13,000 When Income Is $12,000, and Consumption