The year 2015 Base Year Price Index = (120) Base Year Output = (4 million) The year 2016 Current Year Price Index = (140) Current Year Output = (5 million) ii. Calculate MPS for the following data: Y1=2000S1=300 Y2=4000 S2=800
The year 2015 Base Year Price Index = (120) Base Year Output = (4 million) The year 2016 Current Year Price Index = (140) Current Year Output = (5 million) ii. Calculate MPS for the following data: Y1=2000S1=300 Y2=4000 S2=800
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
|
The year 2015 |
Base Year |
Base Year Output = (4 million) |
|
The year 2016 |
Current Year Price Index = (140) |
Current Year Output = (5 million) |
ii. Calculate MPS for the following data:
Y1=2000S1=300
Y2=4000 S2=800
Expert Solution
Step 1
The marginal propensity to save is the ability of the economy to save out of the increased income. It is the fraction of the increased income which is used for the purpose of saving in the economy. Thus, the marginal propensity to save can be calculated by dividing the change in savings by the change in the income.
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