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Marginal Propensity to save (MPS) is the ratio of change in total saving to change in total disposable income.Symbolically,
MPS = ?S/?Y
For example, total saving in an economy increase from $ 2,000 crore to $ 5,000 crore, and total disposable income rises from $ 10,000 crore to $ 20,000 crore. Then, the MPS will be calculated as follows:
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Consider the multiplier model we have studied in class. Assume that the economy is initially in equilibrium and that real income is $180. The marginal propensity to expend is 0.66.
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