Answer the following
1.can MPS be negative
2.can MPS be zero
3.What is the maximum value of MPS
4. what is the minimum value of MPS
5.can MPS be greater than 1
(answer in tabular form)
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| Situation | Explanation |
|---|---|
| 1.can MPS be negative | No, MPS can never be negative as MPS refers to the slope of savings function which is always positive because of the positive relationship between the two variables. |
| 2.can MPS be zero | Yes, MPS can be zero when whole of change in income is spent on consumption so in this situation ΔC=ΔY Where ΔY is change in income. |
| 3.What is the maximum value of MPS | The maximum value of MPS is 1 in the condition when all the additional units of income is saved. |
| 4. what is the minimum value of MPS | The minimum value of MPS can be 0 in the case where no additional units of income is saved. |
| 5.can MPS be greater than 1 | MPS can not be greater than 1 because the rate of change in savings is not greater than the rate of change in income. |