Economics · Consumption and Saving Functions
Consider a standard linear saving function graph where saving is plotted on the Y-axis and disposable income on the X-axis. Which of the following statements are correct regarding a typical consumption/saving behavior model? (i) Saving is positively related to income. (ii) Marginal Propensity to Save (MPS) is positive, but less than 1. Choose the correct answer from the code given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Neither (i) nor (ii)
- 2Only (ii)
- 3Both (i) and (ii)✓
- 4Only (i)
Correct answer
Both (i) and (ii)
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