The marginal propensity to save is 0.8.
The value of MPS can never be negative. It varies between 0 and 1.
The marginal propensity to consume (MPC) is described as the percentage of an mixture increase in pay that a customer spends on the intake of goods and offerings, in preference to saving it.
The marginal propensity to store (MPS) is the element of each more dollar of a household's profits it truly is stored. MPC is the portion of every more dollar of a family's profits this is consumed or spent. customer conduct regarding saving or spending has a very considerable effect on the economic system as an entire.
Government spending = $25 billion
Equilibrium output rises by a total = $125 billion
⇒ Propensity to consume - 25/125 = 0.2
⇒ Propensity to save = 1-0.2
=0.8
Hence, propensity to save is 0.8
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