CH9-10.04.09.1

# CH9-10.04.09.1 - Marginal propensity to save is the ratio...

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10.04.2009-PART1 CHAPTER 9 BUILDING THE AGREEGATE EXPENDITURES MODEL Average and Marginal Propensities a. Average Propensity to Consume and Save: Average propensity to consume (APC) is the ratio of the DI consumed. (C/DI) Average propensity to save (APS) is the ratio of the DI saved. (S/DI) Given that DI=C+S, APC+APS=1 b. Marginal Propensity to Consume and Save: ∆DI: Marginal Income ∆C: Marginal Consumption MPC=∆C/∆DI Therefore, MPC is the ratio of change in C to the change in DI.
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Unformatted text preview: Marginal propensity to save is the ratio of marginal saving (∆S) to the marginal income. MPS=∆S/∆DI MPC+MPS=1 (or CTS=1) c. The Marginal Propensity to Consume and the Marginal Propensity to Save as Slopes? In the consumption schedule the slope reflects the ratio of a change in DI. (That is rise over run) In the saving schedule the slope is the ratio of a change in S to the change in DI....
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