If the marginal propensity to save is 0.3, then the corresponding marginal propensity to consume must be ____.
A)0.7
B)0
C)1
D)0.5

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is defined as the portion of each additional dollar of income that is saved rather than spent. The marginal propensity to consume (MPC) is the portion of each additional dollar of income that is spent rather than saved. The MPC and MPS must sum to one (i.e. MPC + MPS = 1). Therefore, if the MPS is 0.3, then the MPC must be 0.7 (i.e. 1 - 0.3 = 0.7).

If the Marginal Propensity to Save Is 0