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Explain why the MPC and the MPS must always add up to one.

MPC and MPS describe consumer's tendencies to fully utilize their income. MPC relates to consumption tendency while MPS to saving tendency.

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Explain why the MPC and the MPS must always add up to one.

MPC (Marginal Propensity to Consume) means extra consumption from an extra dollar of income.
And, MPS (Marginal Propensity to Save) means extra saving from an extra dollar of income.
That ...

Solution Summary

MPC and MPS describe consumer's tendencies to fully utilize their income. MPC relates to consumption tendency while MPS to saving tendency.

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