\(\begin{array}{l}
\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\
\begin{array}{ccccccccc}
\hline \begin{array}{c}
\text { Real } \
\text { GDP }
\end{array} & \begin{array}{c}
\text { Net } \
\text { taxes }
\end{array} & \begin{array}{c}
\text { Disposable } \
\text { income } \
(Y)
\end{array} & \begin{array}{c}
\text { Consumption } \
(N T)
\end{array} & \begin{array}{c}
\text { Saving } \
(Y-N T)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { investment } \
(S)
\end{array} & \begin{array}{c}
\text { Net } \
\text { exports } \
(N X)
\end{array} & \begin{array}{c}
\text { Government } \
\text { purchases } \
(G)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { aggregate } \
\text { expenditure } \
(C+I+N X+G)
\end{array} \
\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \
3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \
4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \
4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \
5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \
\hline
\end{array}
\end{array}\)
-Refer to the table in the exhibit.What is the marginal propensity to save?
A) 5/6
B) 4/5
C) 3/4
D) 1/3

Question

\(\begin{array}{l}
\text { Schedule for Real GDP, Net Taxes and Government Purchases (Trillions of Dollars) }\
\begin{array}{ccccccccc}
\hline \begin{array}{c}
\text { Real } \
\text { GDP }
\end{array} & \begin{array}{c}
\text { Net } \
\text { taxes }
\end{array} & \begin{array}{c}
\text { Disposable } \
\text { income } \
(Y)
\end{array} & \begin{array}{c}
\text { Consumption } \
(N T)
\end{array} & \begin{array}{c}
\text { Saving } \
(Y-N T)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { investment } \
(S)
\end{array} & \begin{array}{c}
\text { Net } \
\text { exports } \
(N X)
\end{array} & \begin{array}{c}
\text { Government } \
\text { purchases } \
(G)
\end{array} & \begin{array}{c}
\text { Planned } \
\text { aggregate } \
\text { expenditure } \
(C+I+N X+G)
\end{array} \
\hline 3.0 & 0.9 & 2.1 & 2.0 & 0.1 & 0.5 & -0.2 & 0.9 & 3.2 \
3.6 & 0.9 & 2.7 & 2.4 & 0.3 & 0.5 & -0.2 & 0.9 & 3.5 \
4.2 & 0.9 & 3.3 & 2.8 & 0.5 & 0.5 & -0.2 & 0.9 & 4.0 \
4.8 & 0.9 & 3.9 & 3.2 & 0.7 & 0.5 & -0.2 & 0.9 & 4.4 \
5.4 & 0.9 & 4.5 & 3.6 & 0.9 & 0.5 & -0.2 & 0.9 & 4.8 \
\hline
\end{array}
\end{array}\)
-Refer to the table in the exhibit.What is the marginal propensity to save?  
A) 5/6 
B) 4/5 
C) 3/4 
D) 1/3

Quizplus · Accepted Answer

Marginal propensity to save (MPS) is the change in saving resulting from a change in income. It is calculated as the change in saving (ΔS) divided by the change in income (ΔY). From the table, we can see that when real GDP increases from 3.0 to 3.6, saving increases from 0.1 to 0.3. Therefore, ΔS = 0.3 - 0.1 = 0.2 and ΔY = 3.6 - 3.0 = 0.6. Thus, MPS = ΔS/ΔY = 0.2/0.6 = 1/3. Therefore, the correct choice is (D).

Note that we cannot use the numbers for any other year to calculate MPS, as it will result in a different value. The MPS (or any other slope) varies along the curve of the consumption function.

-Refer to the Table in the Exhibit