Macroeconomics

Suppose the marginal propensity to consume is 0.75. What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?


The marginal propensity to consume (MPS) the percent of an additional amount of income that would be spent on consumption (by a person or a group of people). Whatever the person doesnt spend, is by definition, savings; MPS=(1-MPC). So, with MPC=.75, if income rose by, say, $100 then consumption would rise by $75, savings by $25.

Current statistics show that current savings rates are quite low, relative to previous generations.

The Average propensity to consume APC is simply (total consumption)/(total income)

In general, the MPC is a "statistic" regarding the marginal income. You should not generally infer information about the APC based solely on the MPC. That said, IF the MPC is constant across all income classes, then the MPC=APC.

  1. 👍
  2. 👎
  3. 👁

Respond to this Question

First Name

Your Response

Similar Questions

  1. ECON-HELP!!

    1. In the Country of Wiknam, the velocity of money is constant. Real GDP grows by 5 percent per year, the money stock grows by 14 percent per year, and the nominal interest rate is 11 percent. What is the real interest rate? 2.

  2. Economics/Algebra

    A monopolist has a constant marginal and average cost of $10 and faces a demand curve of QD = 100 - 10P. Marginal revenue is given by MR=100-.20P. a. Calculate the monopolist's profit maximizing quantity, price, and profit. b. Now

  3. Algebra

    83. Minimizing Marginal Cost The marginal cost of a product can be thought of as the cost of producing one additional unit of output. For example, if the marginal cost of producing the 50th product is $6.20, it cost $6.20 to

  4. Economics

    Why do people routinely stuff themselves at all-you-can-eat buffets? Explain in terms of both utility and demand theories. At any level, the marginal cost of take another bite at an all-you-can-eat place is zero. In terms of

  1. economics

    Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns

  2. Microeconomics

    If the wage exceeds the value of the marginal product of labor, then hiring another worker: A. Decreases the firm’s total revenue B. Increases the firm’s profit C. Increases the firms total cost D. All of the above are correct

  3. Calculus

    Suppose the total cost in dollars per week by Capital Corporation for producing its best-selling product is given by 𝐶(𝑥) = 1000 + 300𝑥. The revenue function for the production of the product was derived to be 𝑅(𝑥)

  4. math

    Suppose C(x) measures an economy's personal consumption expenditure and x the personal income, both in billions of dollars. Then the following function measures the economy's savings corresponding to an income of x billion

  1. economics

    Suppose a monopolist faces an inverse demand function P=100-1/2Q, and the monopolist has a fixed marginal cost of $20. How much more would the monopolist make from perfect price discrimination compared to simply producing where

  2. microeconomic

    Suppose you consume three pounds of beef and five pounds of pork per month. The price of beef is $ 1.50 per pound, and pork is $ 2.00 per pound. Assuming you have studied economics and achieved consumer equilibrium, what is the

  3. Mathematics

    If 10 students consume 1185kg of meat in 21days, find how much 16 students will consume in 14days,if consumption takes the same rate.

  4. Macro Consumption Question

    (Simple Spending Multiplier) For each of the following values for the MPC (marginal propensity to consume), determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion

You can view more similar questions or ask a new question.