Suppose the economy's saving schedule shifts from S₁ to S ₂ as shown in the below diagram. We can say that its: A) MPC has increased. B) MPS has increased. C) APS has increased at all levels of disposable income. D) APS has decreased at all levels of disposable income.

Question

Quizplus · Accepted Answer

The saving schedule shift to the right (from S₁ to S ₂) indicates an increase in the marginal propensity to save (MPS), meaning that more of each additional dollar of disposable income will be saved rather than spent. This is evidenced by the fact that at each level of disposable income, the amount of saving has increased, as shown by the shifting of the saving schedule. Therefore, the correct answer is B, which states that MPS has increased.

Suppose the Economy's Saving Schedule Shifts from S1 to S

Suppose the Economy's Saving Schedule Shifts from S₁ to S