ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Marginal propensity to save (MPS) is an economic measure of how savings change, given a change in income. It is calculated by simply dividing the change in savings by the change in income. A larger MPS indicates that small changes in income lead to large changes in savings, and vice-versa.

Detailed explanation-2: -Typically, the higher the income, the higher the MPS, because as wealth increases, so does the ability to satisfy needs and wants, and so each additional dollar is less likely to go toward additional spending.

Detailed explanation-3: -saving to total income; the marginal propensity to save equals the ratio of a change in saving to a change in income. The sum of the propensity to consume and the propensity to save always equals one (see propensity to consume).

Detailed explanation-4: -MPS is the ratio of change in saving to change in income. Marginal propensity to save is an increase in saving caused by a change in a unit of income.

Detailed explanation-5: -Hence, the value of the multiplier is two.