Question

The sum of MPC and MPS is always equal to _____

Options

• One

• Two

• Three

• None of the above

Answer 1

The sum of MPC and MPS is always equal to One

Explanation:

The relationship between MPC and MPS can be expressed as

Y = C + S (assuming that earned income is spent or saved).

Or, ΔY = ΔC + Δ5

ΔY divides both sides

`(Δ"Y")/(Δ"Y") = (Δ"C")/(Δ"Y") + (Δ"S")/(Δ"Y") [(Δ"S")/(Δ"Y") = "MPS"]`

Or, 1 = MPC + MPS

Or, MPC = 1 − MPS

Or, MPS = 1 − MPC

As a result, the sum of MPC and MPS is always one.