Question

An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following:
National income = 1,000
Autonomous consumption=100
Investment=120

Answer 1

Given :
National Income (Y) = 1000
Autonomous Consumption (a) = 100
Investment (I) = 120
Y=C+I
C=a+bY
Y=100+`bxx1000+120`
1000-120=100+b
880=100+1000b
880-100=1000b
780=1000b
`b=(780)/(1000)=0.78`
`therefore MPC=0.78`
MPS=1-MPC
=1-0.78
=0.22