Economists are generally concerned about the rising Marginal Propensity to Save in an economy.Explain why?

A rising marginal propensity to save in an economy implies a reduction in the investment multiplier as 

Investment multiplier(k) = 1MPS

A reduction in investment multiplier implies a fall in income level in an economy which can negatively affect the gross domestic product of an economy. Therefore, the economists are generally concerned about rising MPS in an economy. 

Also, please do not keep on piling-up your questions, rather you should ask 1-2 questions in each subject (Accountancy, Economics and Business Studies) on daily basis as we need to cater the needs of the other students as well.

  • 6
What are you looking for?