Which of the following statements is false?
A) MPC plus MPS equals 1.
B) MPC is additional saving divided by additional disposable income.
C) The MPS is the ratio of the change in saving to the change in disposable income.
D) If MPC equals 0.80,autonomous consumption equals $400,and disposable income equals $600,then consumption equals $880.
E) none of the above

Question

Quizplus · Accepted Answer

MPC (Marginal Propensity to Consume) is defined as the ratio of the change in consumption to the change in disposable income, not the ratio of additional saving to additional disposable income. This makes statement B false.

Which of the Following Statements Is False