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The marginal propensity to save (MPS) is the proportion of additional saving (dS) out of an additional income (dY): MPS=dS/dY The marginal propensity to save is the slope of the savings line. Since income can only be consumed or saved, the sum of the marginal propensities to consume and to save is one: MPC+MPS=1.
If a family has an increase in income of $1,000 and decides to save $400 of that increase, the marginal propensity to save is MPS = 400/1,000 = 0.4 or 40%. |
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