Answer to Question #235355 in Macroeconomics for SIYA

Question

1.      if a households income falls from R20 000 to R17 000 and its consumption falls from R18 000 to R15 000, then: 

Answer 1

It's marginal propensity on saving tends to be the proportion or amount of income utilized in saving compared to consumption.

marginal propensity$=\frac{change in consumption}{change in income}$

$= \frac{8000-9500}{1000-12000}$

$=\frac{-1500}{-2000}$

= 0.750