Question

Choose the answer that best defines the marginal propensity to save (MPS). The share of all income earned that is devoted to saving rather than consumption The share of all income earned that is not devoted to consumption The slope of the consumption function The share of each additional dollar of income earned that is devoted to saving rather than consumption The sum of all saving from all people in the economy The change in saving when workers become unemployed

Answer 1

Answer:

The share of each additional dollar of income earned that is devoted to saving rather than consumption.

Explanation:

The marginal propensity to save is defined as the fraction of increased income that is reserved for saving and not consumption, and it is the slope of the graph of income against savings.

For example if an individual earns an extra dollar and he has propensity to save of 0.5 that means out of the one dollar he will save 50 cents and spend the remaining 50 cents.