Question

The marginal propensity to save is defined as:________.

a) saving divided by disposable income.
b) disposable income divided by saving.
c) the change in saving divided by the change in disposable income.
d) the change in disposable income divided by the change in saving.

Answer 1

C) the change in saving divided by the change in disposable income.

Step-by-step explanation:

The easiest way to calculate MPS is 1 - marginal propensity to consume (MPC). You can do two things with money, spend it or save it. By saving it, I'm also including any type of investment carried out.

So the money that you do not spend, he only other option is to save it. Whether you save it in a bank account or simply have it at your house.

Answer 2

c) the change in saving divided by the change in disposable income.

Step-by-step explanation:

Marginal Propensity to Save (MPS) is defined as the proportion of the aggregate increase in income that is saved by a consumer rather than spent. MPS is in contrast to marginal propensity to consume (MPC) which is the proportion of aggregate increase in income that is consumed.

MPS is calculated as the change in savings divided by the change in income.

That is,

MPS=∆S/∆Y

Where,

∆S= change in savings

∆Y= Change in income

Marginal propensity to save changes with income level. The higher the income level; the higher the MPS, the lower the income level; the lower the MPS.