In the savings function S = -725 + 0.25y, 0.25 is the
A) MPC.
B) MPS.
C) slope of the consumption function.
D) vertical intercept of the savings function.

Question

Quizplus · Accepted Answer

In the savings function S = -725 + 0.25y, 0.25 is the marginal propensity to save (MPS), which represents the portion of each additional dollar of income that individuals save rather than spend. The MPS is one of the two key parameters in the Keynesian theory of income determination, together with the marginal propensity to consume (MPC). The slope of the consumption function is determined by the MPC, which measures the change in consumption spending induced by a change in income. The vertical intercept of the savings function (-725 in this case) represents the autonomous level of saving, which is the saving that occurs regardless of income level.

In the Savings Function S = -725 + 0