Homework Answers
Answer 32
The given statement is wrong.
The sum of MPC (marginal propensity to consume) and MPS (marginal propensity to save) is always equal to one. Therefore, if the value of MPC is positive then the value of MPS can also be positive. For example, if the value of MPC is 0.9 then the value of MPS will be calculated as:
MPC + MPS = 1
0.9 + MPS = 1
MPS = 1 - 0.9
MPS = 0.1
Note: The value of MPC can never be more than 1 or less than zero. It can never be zero also because there must be some increase in the proportion of consumption when income of a consumer increases.
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