Question
If disposable income increases by $50 billion and there is an MPS of 0.20, the increase in saving will be
Multiple Choice
$20 billion.
$50 billion.
$100 billion.
$10 billion.
Multiple Choice
$20 billion.
$50 billion.
$100 billion.
$10 billion.
Answers
GPT-4o mini
To calculate the increase in saving when disposable income increases by $50 billion and the marginal propensity to save (MPS) is 0.20, we use the formula:
\[
\text{Increase in Saving} = \text{Increase in Disposable Income} \times \text{MPS}
\]
Substituting the given values:
\[
\text{Increase in Saving} = 50 \text{ billion} \times 0.20 = 10 \text{ billion}
\]
Therefore, the increase in saving will be **$10 billion**.
\[
\text{Increase in Saving} = \text{Increase in Disposable Income} \times \text{MPS}
\]
Substituting the given values:
\[
\text{Increase in Saving} = 50 \text{ billion} \times 0.20 = 10 \text{ billion}
\]
Therefore, the increase in saving will be **$10 billion**.