Question

Suppose disposable income increases by $2,000. As a result, consumption increases by $1,500. Answer the following questions based on this information. Where appropriate, enter your answer as a decimal rather than as a percentage.

The increase in savings resulting directly from this change in income is:

The marginal propensity to save (MPS) is:

Answer 1

Instructions are listed below.

Step-by-step explanation:

Giving the following information:

Suppose disposable income increases by $2,000. As a result, consumption increases by $1,500. Answer the following questions based on this information.

The increase in savings resulting directly from this change in income is $500 (2,000 - 1,500)

Marginal propensity to save (MPS)= change in savings/ change in income

MPS= 500/2000= 0.25= 25%