ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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-3
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-.5
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3
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-1.5
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Detailed explanation-1: -How Do You Calculate Marginal Propensity to Consume? To calculate the marginal propensity to consume, the change in consumption is divided by the change in income. For instance, if a person’s spending increases 90% more for each new dollar of earnings, it would be expressed as 0.9/1 = 0.9.
Detailed explanation-2: -How are MPC and MPS calculated? The marginal propensity to consume (MPC) is found by dividing the change in spending on consumption by the change in someone’s income. The marginal propensity to save (MPS) is similarly found by dividing the change in saving by the change in income.
Detailed explanation-3: -k = 1 / (1 – MPC) This formula shows the relation between the increase in the earning of the nation due to the investments by the respective government or the corporates, if, there is a fixed pattern of expenditure from the additional income.