Question

Define “marginal propensity to consume” (MPC) and “marginal propensity to save” (MPS) in plain English. What...

Define “marginal propensity to consume” (MPC) and “marginal propensity to save” (MPS) in plain English. What must be true about the sum MPC+MPS?

Homework Answers

Answer #1

Answer :-

Marginal Propensity To Consume (MPC) :-

The marginal propensity to consume(MPC) is defined as the proportion of extra income that is spent on consumption.MPC in simply states that how likely to spend/ save extra money.

It may also be defined as the ratio of the change in consumption spending to a given change in income.

MPC = ∆Consumption/ ∆Income

Marginal Propensity To Save (MPS) :-

The marginal propensity to save(MPS) is defined as the proportion of an aggregate raise in pay that a consumer spends on saving rather than on the consumption of goods and services.

It may also be defined as the ratio of change in savings and change in income.

MPS = ∆Savings/ ∆Income

Sum of MPC and MPS :-

The Marginal propensities to consume and save show the fractions of any change in total income that are consumed and saved;

MPC + MPS = 1

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
define the marginal propensity to consume (MPC). Do you think the MPC has risen or fallen...
define the marginal propensity to consume (MPC). Do you think the MPC has risen or fallen since the start of the COVID-19 pandemic? Explain your reasoning.
How are marginal propensity to Consume and marginal Propensity to Save calculated?
How are marginal propensity to Consume and marginal Propensity to Save calculated?
Use the Marginal Propensity to Save (MPS) to explain the ‘paradox of thrift’.
Use the Marginal Propensity to Save (MPS) to explain the ‘paradox of thrift’.
4. [Marginal Propensity to Consume] Find the marginal propensity to consume (MPC = dC/dY) for each...
4. [Marginal Propensity to Consume] Find the marginal propensity to consume (MPC = dC/dY) for each of the following consumption functions. (a) C = C0 +bY, C0 = 1500, b = 0.6. (b) C = 1200+0.75Yd, Yd = Y ?T, and T = 100. (c) C = 2000+0.8Yd, Yd = Y ?T, and T = 300+0.1Y.
To represent the consumption function through algebra, it would be expressed as___. A)C=a + MPC*Y, where...
To represent the consumption function through algebra, it would be expressed as___. A)C=a + MPC*Y, where a is autonimous consumption(the amount of consumption expenditure when Y=0), MPC is the marginal propensity to consume, and Y is national income. B)MPC + MPS = 1, where a MPC is the marginal propensity to consume and MOS is the marginal propensity to save. C) C= a+ MPS*Y,where a is a autonimous consumption( the amount of consumption expenditure when Y= 0), MPS is the...
In a closed economy, the marginal propensity to save increases and tax rates remain unchanged. What...
In a closed economy, the marginal propensity to save increases and tax rates remain unchanged. What effect will this have on the marginal propensity to consume and on the multiplier? Assume that the MPS increases from 1/3 to 1/4 and tax rate is 0.20.
Suppose a family's annual income is $58,000; if the marginal propensity to save (MPS) is 0.25,...
Suppose a family's annual income is $58,000; if the marginal propensity to save (MPS) is 0.25, and the income for the family decreases by $15,000, then the decrease in consumption will be Select one: a. $3,750. b. $10,500. c. $11,250. d. $1,500.
Where marginal propensity to consume is denoted as MPC, consider the following: a. Assuming no crowding-out...
Where marginal propensity to consume is denoted as MPC, consider the following: a. Assuming no crowding-out and MPC = 0.75, calculate the amount of government spending needed to bring this economy back to full-employment output. b. Assuming no crowding-out and that $10 billion would be needed to bring this economy back to full-employment output, calculate the MPC in this economy.
~Explain the marginal propensity to consume & save. ~List & explain the reasons why investment is...
~Explain the marginal propensity to consume & save. ~List & explain the reasons why investment is unstable. ~Explain the multiplier effect & how the multiplier is computed.
Keynesian model: 1. Define the multiplier 2. Let the marginal propensity to consume = .9; what...
Keynesian model: 1. Define the multiplier 2. Let the marginal propensity to consume = .9; what is the effect of increasing Investment spending by 50?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT