The Marginal Propensity to Consume Plus the Marginal Propensity to Save

question 66

True/False

The marginal propensity to consume plus the marginal propensity to save must always equal 1.

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Definitions:

Real GDP

Real Gross Domestic Product, which adjusts the total value of all produced goods and services within an economy in a year for the effects of inflation, showing the real terms of economic output.

Equation of Exchange

An economic equation that relates the quantity of money, its velocity, and the price level of goods and services to the economy's output of goods and services.

Velocity of Money

The rate at which money is exchanged in an economy, often used to measure the health and vigor of economic activity.

Price Level

A calculation of the average cost of goods and services in an economy at a set point in time.