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If the marginal propensity to consume is .9, then the marginal propensity to save must be:

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Marginal Propensity to Consume and Save Quiz **Question:** If the marginal propensity to consume is 0.9, then the marginal propensity to save must be: **Options:** 1. 1.1 2. 0.9 3. 0.1 4. 1 ### Explanation: In economics, the marginal propensity to consume (MPC) is the increase in consumer spending due to an increase in income. The marginal propensity to save (MPS) is the increase in saving due to an increase in income. By definition, the sum of MPC and MPS always equals 1. In this question, the MPC is given as 0.9. Since MPC + MPS = 1, the MPS must be 1 - 0.9 = 0.1. Thus, the correct answer is option 3: 3. 0.1
Transcribed Image Text:### Marginal Propensity to Consume and Save Quiz **Question:** If the marginal propensity to consume is 0.9, then the marginal propensity to save must be: **Options:** 1. 1.1 2. 0.9 3. 0.1 4. 1 ### Explanation: In economics, the marginal propensity to consume (MPC) is the increase in consumer spending due to an increase in income. The marginal propensity to save (MPS) is the increase in saving due to an increase in income. By definition, the sum of MPC and MPS always equals 1. In this question, the MPC is given as 0.9. Since MPC + MPS = 1, the MPS must be 1 - 0.9 = 0.1. Thus, the correct answer is option 3: 3. 0.1
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