Principles of Macroeconomics / Unit 9 MAC 0809 short lesson, about 20 seconds
Saving, and the Two Propensities
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The idea
Disposable income is consumed or saved, so the two propensities sum to one. The marginal propensity to save is the share of an extra dollar not spent, and its function mirrors the consumption function.
In practice
A propensity to consume of 0.75 means a propensity to save of 0.25.
Where people slip
This is personal saving alone; firms and governments save too.
Your place on the trail
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Builds on
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