Question

Prove that MPC+MPS is equal to 1 (one).What are the major findings about the IS Curve?​

Answer 1

Answer:

Mathematical Relationship between MPC and MPS! The sum of MPC and MPS is equal to unity (i.e., MPC + MPS = 1). For sake of convenience, suppose a man's income Increases by Rs 1. If out of it, he spends 70 paise on consumption (i.e., MPC = 0.7) and saves 30 paise (i.e., MPS = 0 3) then MPC + MPS = 0.7 + 0.3 = 1.

The IS curve depicts the set of all levels of interest rates and output (GDP) at which total investment (I) equals total saving (S). ... The intersection of the IS and LM curves shows the equilibrium point of interest rates and output when money markets and the real economy are in balance.