Consumption and saving Suppose John gets a sales bonus at her place of work that

Question

Consumption and saving
Suppose John gets a sales bonus at her place of work that gives him an extra $600 of disposable income. He chooses to spend $360 and save the remaining $240.
From this, you can tell that John's marginal propensity to consume (MPC) is(0.60, 0.40, 0.24, or 0.36) , and his marginal propensity to save (MPS) is (0.60, 0.40, 0.24, or 0.36). Mathematically, it must always be true that:

Disposable Income is equal to? Disposal Income = (Consumption+Savings, Consumption - Savings, or SavingS - Consumption)

Therefore, it must also be true that:
1 = (MPC - MPS, MPS - MPC, or MPC + MPS)

Explanation / Answer

MPC = Change in consumption / Change in income

= $360 / $600 = 0.60

MPS = Change in saving / Change in income

= $240 / $600 = 0.4

Disposable income = Consumption + Savings ($600 = $360 + $240)

It is always true that 1 = MPC + MPS (= 0.6 + 0.4)

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