Fae would spend $75 per week even if she did not have a steady income. As it stands, her weekly income is $1,000. If Fae's marginal propensity to consume is 0.8, how much does Fae save per week?
A)$75
B)$925
C)$125
D)$0

Question

Quizplus · Accepted Answer

No matter what, Fae spends $75 per week. In addition, she spends 80 cents of every dollar she earns, for a total expenditure of $75 + $800 = $875. Subtract that from her total weekly income ($1,000
$875) and you will get $125. Fae can save $125 per week.
Key Takeaway: MPC stands for "marginal propensity to consume." Basically, MPC looks at the proportion of each dollar earned that will go toward individual consumption spending. MPS is, therefore, the marginal propensity to save. Remember that MPC + MPS for any individual consumer always equals one.

Fae Would Spend $75 Per Week Even If She Did