Question

Consumptionand saving definitions Suppose Kate gets a sales bonus at her place of work that gives her an extra $700 of disposable income. She chooses to spend $560 and save the remaining $140. ps PS From this, you can tell that Kate's marginal propensity to consume (MPC) is and her marginal propensity to save (MPS) is Mathematically, it must always be true that: Disposable income- Therefore, it must also be true that: Suppose Madeline gets a sales bonus at her place of work that gives her an extra $400 of disposable income. She chooses to spend $300 and save the remaining $100. From this, you can tell that Madeline's marginal propensity to consume (MPC) is and her marginal propensity to save (MPS) is Mathematically, it must always be true that: Saving- Therefore, it must also be true that: MPS

Answer 1

From this, you can tell Ana's marginal propensity to consume (MPC) is 0.80, and marginal propensity to save (MPS) is 0.20.

What is marginal propensity to consume?

The marginal propensity to consume (MPC), a metric of induced consumption used in economics, predicts that an increase in available cash would lead to an increase in individual consumer spending. A person's propensity to consume is how much of their discretionary income they spend on consumption. The MPC determines a person's extra spending. Due to the fact that some short-term consumption is unaffected by changes in income, the MPC in the standard Keynesian model is lower than the average propensity to spend (APC). Since consumers cut back on their savings to maintain consumption, income losses do not cause a fall in spending.

Mathematically, it must always be true that:

Therefore, it must also be true that the: MPC = 1 - MPS.

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