Asked by Landrie Pierce on May 13, 2024

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The table given below shows the real gross domestic product (GDP) ,consumption,and planned investment in an economy.The marginal propensity to save (MPS) in the economy is _____.
Table 9.3
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 Real  GDP ($)  Consumption ($)  Planned  Investment ($) 01401001002201002003001003003801004004601005005401006006201007007001008007801009008601001,0009401001,1001,0201001,2001,1001001,3001,180100\begin{array} { c c c } \begin{array} { c } \text { Real } \\\text { GDP } ( \$ ) \end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } \text { Planned } \\\text { Investment } ( \$ ) \end{array} \\\hline 0 & 140 & 100 \\100 & 220 & 100 \\200 & 300 & 100 \\300 & 380 & 100 \\400 & 460 & 100 \\500 & 540 & 100 \\600 & 620 & 100 \\700 & 700 & 100 \\800 & 780 & 100 \\900 & 860 & 100 \\1,000 & 940 & 100 \\1,100 & 1,020 & 100 \\1,200 & 1,100 & 100 \\1,300 & 1,180 & 100\end{array} Real  GDP ($) 01002003004005006007008009001,0001,1001,2001,300 Consumption ($) 1402203003804605406207007808609401,0201,1001,180 Planned  Investment ($) 100100100100100100100100100100100100100100

A) 0
B) 0.1
C) 0.2
D) 0.8
E) 20

Marginal Propensity

A measure that quantifies the change in an economic variable, such as spending or saving, in response to a change in income.

Real Gross Domestic Product

An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a specific period.

Planned Investment

Expenditures intended by businesses to purchase physical capital goods, which are expected to produce future benefits.

  • Understand the concept and calculation of the marginal propensity to save (MPS) and its economic implications.
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Tyler MattocksMay 17, 2024
Final Answer :
C
Explanation :
The marginal propensity to save (MPS) is calculated as the change in savings divided by the change in income. From the table, as income (Real GDP) increases by $100, consumption increases by $80 (e.g., from $140 to $220, then to $300, etc.). This means the remaining $20 ($100 - $80) is saved. Therefore, MPS = $20 / $100 = 0.2.