Answer:
The marginal propensity to save (MPS) is 0.25.
The marginal propensity to consume (MPC) is 0.75.
Explanation:
The disposable income increases by $2,000.
The consumption expenditure increases by $1,500.
The increase in saving
= Increase in income - Increase in consumption
= $2,000 - $1,500
= $500
The marginal propensity save
= [tex]\frac{\Delta S}{\Delta Y}[/tex]
= [tex]\frac{500}{2000}[/tex]
= 0.25
The marginal propensity to consume
= [tex]\frac{\Delta C}{\Delta Y}[/tex]
= [tex]\frac{1500}{2000}[/tex]
= 0.75
