With a marginal propensity to save of .4,the marginal propensity to consume will be:
A) 1.0 minus .4.
B) .4 minus 1.0.
C) the reciprocal of the MPS.
D) .4.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the proportion of any additional income that will be spent. Since the marginal propensity to save (MPS) is 0.4, then the MPC must be 1.0 minus 0.4, which equals 0.6. Therefore, the correct answer is A) 1.0 minus 0.4.

With a Marginal Propensity to Save of