Question

If the saving function is S = - 20 + 0.3Y then what is value of MPC ?​

Answer 1

Answer

given ,

S = -20 +0.3 Y

S= s+(1-b)Y

s= autonomous consumption

(1-b)= marginal propensity to save

Y= income

so by comparing to S ,

MPS= 0.3

we know , MPC + MPS = 1

MPC = 1 - MPS

= 1 - 0.3 = 0.7

so MPC = 0.7