The marginal propensity to save (is constant/ changes) Consider the foilowing ta

Question

The marginal propensity to save (is constant/ changes) Consider the foilowing table for a household's consumption expenditures and disposable income. as whole numbers and include a minus sign where To the nearest dollar, compute desired saving at each level of disposable income. (Enter your responses appropriate.) Consumption Savings Income SO $100 $200 $300 $400 $500 $50 S135 $220 $305 $390 S475 The marginal propensity to save is. Enter your ros onserounded to todecimar places. The marginal propensity to save The margnal propensity to save plus the marginal propensity to consume must equal (Enter your response rounded to two doc mal places along a given saving schedule.

Explanation / Answer

(1) Savings = Income - Consumption

(2) Marginal propensity to save (MPS) = Change in saving / Change in income

= $(25 - 10) / $(500 - 400) = $15 / $100 = 0.15

(3) MPS is constant along a given saving schedule.

(4) MPS plus marginal propensity to consume must equal 1.00.

Income ($) Consumption ($) Savings ($) 0 50 -50 100 135 -35 200 220 -20 300 305 -5 400 390 10 500 475 25

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