Marginal Propensity to Consume and Save

Professor Hildebrandt explains key concepts from Chapter 9, focusing on the marginal propensity to consume (MPC) and the marginal propensity to save (MPS). The video covers the relationship between disposable income, consumption, and savings, emphasizing the equation DI = C + S. Two examples are provided: one calculates MPS when savings and disposable income change, and the other finds the change in savings given MPC and disposable income. The video highlights multiple methods to solve these problems, reinforcing the understanding of these economic concepts.

What is the relationship between the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)?

• MPC and MPS are always equal.

• MPC plus MPS equals one.

• MPC is always greater than MPS.

• MPC and MPS are unrelated.

How is disposable income divided according to the equation DI = C + S?

• Between taxes and savings.

• Between consumption and savings.

• Between investment and savings.

• Between consumption and taxes.

If the marginal propensity to consume (MPC) is 0.7, what is the marginal propensity to save (MPS)?

• 0.5

• 1.0

• 0.7

• 0.3

In Example 1, if savings increase by $200 when disposable income increases by $800, what is the MPS?

• 1/4

• 1/5

• 1/2

• 1/3

In Example 1, what is the MPC if the MPS is found to be 1/4?

• 3/4

• 1/4

• 1/3

• 1/2

In Example 1, what is the change in consumption if savings increase by $200 and disposable income increases by $800?

• $200

• $800

• $600

• $400

In Example 2, if the MPC is 0.6 and disposable income increases by $1,500, what is the MPS?

• 0.3

• 0.4

• 0.5

• 0.6

In Example 2, what is the change in savings if the MPC is 0.6 and disposable income increases by $1,500?

• $900

• $300

• $600

• $1,500

In Example 2, what is the change in consumption if the change in savings is $600 and disposable income increases by $1,500?

• $900

• $600

• $1,500

• $300

What mathematical operation is used in Example 2 to solve for the change in savings?

• Division

• Cross-multiplication

• Subtraction

• Addition