If for every 1 dollar increase in income, savings increases by 25 cents, the marginal propensity to consume is ( qquad ) and the closed economy multiplier is ( qquad ) Select one: a. .25, .04 b. .25, 4 c. .75, 1.333 d. .75, 4
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MPC is the fraction of additional income that a household spends on consumption. MPS is the fraction of additional income that a household saves. It's important to note that MPC + MPS = 1, because every additional dollar of income is either spent or saved. Show more…
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