Use the table below to answer the following questions.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C)and disposable income (YD)for a hypothetical economy.

-Refer to Table 27.1.1. The marginal propensity to save is
A)decreasing as YD increases.
B)equal to zero when YD equals $600.
C)0.75.
D)0.25.
E)4.

Question

Use the table below to answer the following questions.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C)and disposable income (YD)for a hypothetical economy.
 
-Refer to Table 27.1.1. The marginal propensity to save is
A)decreasing as YD increases. 
B)equal to zero when YD equals $600. 
C)0.75. 
D)0.25. 
E)4.

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is the fraction of each additional dollar of disposable income that is saved. MPS can be calculated by dividing the change in saving (ΔS) by the change in disposable income (ΔYD). In this table, as YD increases by $200 ($600 to $800), consumption expenditure (C) increases by $150 ($700 to $850) and saving increases by $50 ($100 to $150). Therefore, MPS = ΔS/ΔYD = $50/$200 = 0.25.

Use the Table Below to Answer the Following Questions