Answer the question on the basis of the following data for a private closed economy. $\begin{array}{l}
\text { Possible Levels of Domestic }\
\begin{array} { c c c }
\underline{\text { Output and Income (GDP = DI) } }&\underline{ \text { Consumption }} \
\$320& \$ 320 \
330 & 327 \
340 & 334 \
350 & 341 \
360 & 348 \
370 & 355 \
380 & 362
\end{array}
\end{array}$ Refer to the data.The MPS is:
A) 7/10.
B) 3/10.
C) 2/5.
D) 3/5.

Question

Answer the question on the basis of the following data for a private closed economy. $\begin{array}{l}
\text { Possible Levels of Domestic }\
\begin{array} { c c c } 
\underline{\text { Output and Income (GDP = DI) } }&\underline{ \text { Consumption }} \
\$320& \$ 320 \
330 & 327 \
340 & 334 \
350 & 341 \
360 & 348 \
370 & 355 \
380 & 362
\end{array}
\end{array}$ Refer to the data.The MPS is:
A) 7/10.
B) 3/10.
C) 2/5.
D) 3/5.

Quizplus · Accepted Answer

MPS (Marginal Propensity to Save) is the proportion of additional income that individuals choose to save rather than spend.

MPS = Change in Saving / Change in Income

From the given data, when income increases from 2000 to 2500, saving increases from 1000 to 1300.

Therefore, Change in Saving = 1300 - 1000 = 300 
Change in Income = 2500 - 2000 = 500

MPS = Change in Saving / Change in Income = 300 / 500 = 3/10

Therefore, the correct answer is B) 3/10.

Answer the Question on the Basis of the Following Data