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Question

The ratio of total additional planned savings in an economy to the total additional income of the economy is known as:

A Marginal propensity to consume (MPC) Correct Answer Incorrect Answer
B Savings rate Correct Answer Incorrect Answer
C Marginal propensity to save (MPS) Correct Answer Incorrect Answer
D Consumption rate Correct Answer Incorrect Answer

Solution

·  Marginal propensity to save (mps) is a fraction which gives an idea of what proportion of the total additional income of the economy people wish to save as a whole. It gives us the ratio of total additional planned savings in an economy to the total additional income of the economy). · Subtracting the mps from 1, we get the marginal propensity to consume (mpc), which, in a similar way, is the fraction of total additional income that people use for consumption.

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