Asked by Nathan Perrine on Jun 14, 2024
Verified
The MPS is
A) .25
B) .50
C) .75
D) 1.00
MPS
Stands for Marginal Propensity to Save, which is the ratio of the change in savings to the change in disposable income. It indicates how much of an additional income unit is saved rather than spent.
- Comprehend the differences and applications of average and marginal propensities to save and consume.
Verified Answer
QE
Queenie EsperanceJun 21, 2024
Final Answer :
A
Explanation :
MPS (Marginal Propensity to Save) is the fraction or percentage of each additional dollar of income that households save rather than spend. Therefore, if the MPS is .25, then for every additional dollar of income received, households will save 25 cents and spend 75 cents. This suggests that the economy has a higher propensity to consume, and therefore the government could increase its spending without causing a significant decrease in savings.
Learning Objectives
- Comprehend the differences and applications of average and marginal propensities to save and consume.