Question

The relationship between the marginal propensity to consume​ (MPC) and the marginal propensity to save​ (MPS) can best be described as

A. MPC​ + MPS​ = 1.
B. MPC​ = 1minusMPS.
C. MPS​ = 1minusMPC.
D. All of the above.

Answer 1

Answer: The answer is A MPC + MPS=1

Step-by-step explanation:

MPC: This is the proportion of the addition of income which is saved for consumption of goods and services in the economy. It is a measure of the relationship between the change in income and the change in consumption of consumers for goods and services in the economy. In the sense that, when there is an increase in individuals or households income it will also leads to an increase in their level of consumption in the economy and vice versa.it is calculated as

MPC= change in consumption /change in income

MPS: This is the addition of income that is saved by individuals or households in the economy. It is a measure of the relationship between change in income and change in savings in the economy. In the sense that, when there's an increase in income of an individual's or households, it will also leads to an increase in their level of savings in the economy and vice versa. In other words, a fall in MPS will lead to a decrease in national income. It is calculated as

MPS= change in savings /change in income

Answer 2

Explanation: A - MPS + MPC = 1

The marginal propensity to save​ (MPS) is the proportion of an household's income that is saved

The marginal propensity to consume​ (MPC) is the proportion of an household's income that is consumed.

Income is either saved or consumed, therefore the sum of MPS and MPC should equal 1