Final answer:
When the marginal propensity to consume is less than 1, the marginal propensity to save is positive because the sum of the two must equal 1. An increase in disposable income results in both increased consumption and saving, with reduction in average propensity to consume over time.
Step-by-step explanation:
When the marginal propensity to consume (MPC) is less than 1, it can be concluded that the marginal propensity to save (MPS) is positive. This is because the MPC and MPS are complementary, meaning they must add up to 1. If the MPC is, for example, 0.8, then the MPS would be 0.2, indicating that for every additional dollar of disposable income, 80 cents would be consumed and 20 cents would be saved.
A decline in the average propensity to consume occurs when an increase in disposable income leads to consumption increasing by a smaller proportion than the income increase. Since individuals save a portion of their additional income, the average propensity to consume decreases, and this is reflected in a higher savings rate.
Therefore, the correct conclusion is option b: The marginal propensity to save is positive.