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Question
Define Marginal Propensity to Save (MPS).
Solution
Marginal Propensity to Save (MPS):
- Marginal Propensity to Save is the ratio of change in saving to a change in income.
- MPS is obtained by dividing change in savings by change in income. It can be expressed algebraically as MPS = `" ΔS"/"ΔY"`
∆S = Change in Saving; ∆Y = Change in Income
Since MPC + MPS = 1
MPS = 1 – MPC and MPC = 1 – MPS.
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