Question : The marginal propensity to save (MPS) is defined as the:
Option 1: Proportion of income that is saved
Option 2: Proportion of income that is consumed
Option 3: Proportion of income that is taxed
Option 4: Proportion of income that is invested
Answer (1)
21st Jan, 2024
Correct Answer:
Proportion of income that is saved
Solution : The correct answer is (a) Proportion of income that is saved.
It represents the change in savings resulting from a change in income. The MPS indicates how much of an additional unit of income is saved rather than spent on consumption. For example, if the MPS is 0.2, it means that for every additional dollar of income, 20 cents will be saved.
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