Question

If the government increases its purchases of goods and services by $3,000 and the mpc is 0.8 the mps is

Answer 1

The marginal propensity to save (MPS) is 0.2.

Step-by-step explanation:

The marginal propensity to consume (MPC) is the amount that consumption increases when income increases. In this case, if the government increases its purchases of goods and services by $3,000, and the MPC is 0.8, it means that for every additional dollar of income, $0.80 will be consumed.

To find the marginal propensity to save (MPS), we subtract the MPC from 1. So, MPS = 1 - MPC = 1 - 0.8 = 0.2. This means that for every additional dollar of income, $0.20 will be saved.

In summary, if the government increases its purchases of goods and services by $3,000 and the MPC is 0.8, the MPS is 0.2.