Marginal Propensity to consume + Marginal Propensity to Save is always equal to Group of answer choicesidentical01varies
Question
Marginal Propensity to consume + Marginal Propensity to Save is always equal to Group of answer choicesidentical01varies
Solution
The sum of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is always equal to 1.
Here's why:
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Marginal Propensity to Consume (MPC) is the increase in consumer spending due to an increase in income. This is how much of additional income will be used for consumption.
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Marginal Propensity to Save (MPS) is the increase in household savings when disposable income rises. This is how much of additional income will be saved.
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Since an increase in income can either be consumed or saved, the sum of MPC and MPS must be equal to 1.
So, the answer to your question is 1.
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