If consumption is defined as C = 2,000 + 0.8Y,then the marginal propensity to save is 0.8.

Question

Quizplus · Accepted Answer

The formula for marginal propensity to save (MPS) is MPS = ΔS/ΔY, where ΔS is the change in saving and ΔY is the change in income. In this case, ΔS is 0.8ΔY since consumption is defined as C = 2,000 + 0.8Y, meaning that saving is equal to 0.2Y (since income is equal to consumption plus saving). Therefore, the MPS is 0.2, not 0.8, making option B the correct answer.

If Consumption Is Defined as C = 2,000 + 0