A change in the marginal propensity to save can be graphically represented by:
A)a movement along the investment function.
B)a movement along the saving function.
C)a parallel shift of the consumption function.
D)a parallel shift of the saving function.
E)a change in the slope of the saving function.

Question

Quizplus · Accepted Answer

A change in the marginal propensity to save means that for every additional unit of income, individuals save more or less than they previously did. This would result in a change in the slope of the saving function. The saving function shows the relationship between the level of income and the level of saving, so a change in the slope of this function indicates a change in the marginal propensity to save. A movement along the saving function would simply indicate a change in the level of income, not a change in the marginal propensity to save. A parallel shift of the consumption function would indicate a change in the level of autonomous consumption, not a change in the marginal propensity to save. A parallel shift of the saving function would indicate a change in autonomous saving, not a change in the marginal propensity to save.

A Change in the Marginal Propensity to Save Can Be