If income increases by $100 and $75 of the increase is spent (consumed),the MPS equals
A)1/4
B)1/2
C)3/4
D)4/5
E)1

Name: If income increases by $100 and $75 of the increase is spent (consumed),the MPS equals A)1/4 B)1/2 C)3/4 D)4/5 E)1
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Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in income. If $75 is spent, then $25 is saved. Therefore, MPS = $25/$100 = 1/4.

If Income Increases by $100 and $75 of the Increase