Question

Define Marginal Propensity to Save (MPS).

Answer 1

Marginal Propensity to Save (MPS):

1. Marginal Propensity to Save is the ratio of change in saving to a change in income.
2. MPS is obtained by dividing change in savings by change in income. It can be expressed algebraically as MPS = `" ΔS"/"ΔY"`
   ∆S = Change in Saving; ∆Y = Change in Income
   Since MPC + MPS = 1
   MPS = 1 – MPC and MPC = 1 – MPS.