Asked by Landrie Pierce on May 13, 2024
Verified
The table given below shows the real gross domestic product (GDP) ,consumption,and planned investment in an economy.The marginal propensity to save (MPS) in the economy is _____.
Table 9.3
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Real GDP ($) Consumption ($) Planned Investment ($) 01401001002201002003001003003801004004601005005401006006201007007001008007801009008601001,0009401001,1001,0201001,2001,1001001,3001,180100\begin{array} { c c c } \begin{array} { c } \text { Real } \\\text { GDP } ( \$ ) \end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } \text { Planned } \\\text { Investment } ( \$ ) \end{array} \\\hline 0 & 140 & 100 \\100 & 220 & 100 \\200 & 300 & 100 \\300 & 380 & 100 \\400 & 460 & 100 \\500 & 540 & 100 \\600 & 620 & 100 \\700 & 700 & 100 \\800 & 780 & 100 \\900 & 860 & 100 \\1,000 & 940 & 100 \\1,100 & 1,020 & 100 \\1,200 & 1,100 & 100 \\1,300 & 1,180 & 100\end{array} Real GDP ($) 01002003004005006007008009001,0001,1001,2001,300 Consumption ($) 1402203003804605406207007808609401,0201,1001,180 Planned Investment ($) 100100100100100100100100100100100100100100
A) 0
B) 0.1
C) 0.2
D) 0.8
E) 20
Marginal Propensity
A measure that quantifies the change in an economic variable, such as spending or saving, in response to a change in income.
Real Gross Domestic Product
An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a specific period.
Planned Investment
Expenditures intended by businesses to purchase physical capital goods, which are expected to produce future benefits.
- Understand the concept and calculation of the marginal propensity to save (MPS) and its economic implications.
Verified Answer
TM
Tyler MattocksMay 17, 2024
Final Answer :
C
Explanation :
The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in income. From the table, as income (Real GDP) increases by $100, consumption increases by $80 (e.g., from $140 to $220, then to $300, etc.). This means the remaining $20 ($100 - $80) is saved. Therefore, MPS = $20 / $100 = 0.2.
Learning Objectives
- Understand the concept and calculation of the marginal propensity to save (MPS) and its economic implications.