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If the consumption function in the economy is given as C = 400 + 0.6(Yd), what is the MPS? a. 0.6 b. 0.4 c. 2.5 d. 400

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter10: Keynesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy

Section10.2: The Simple Keynesian Model

Problem 2ST

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Question

If the consumption function in the economy is given as C = 400 + 0.6(Yd), what is the MPS?

a. 0.6

b. 0.4

c. 2.5

d. 400

Expert Solution

Step 1.

MPC = coefficient of Yd = 0.6

MPS = 1 - MPC = 1 - 0.6 = 0.4

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