The Marginal Propensity to Save Is

question 32

Multiple Choice

The marginal propensity to save is:

• A) Equal to (1 + MPC).
• B) The fraction of each additional dollar of saving that goes to the stock market.
• C) The fraction of each additional dollar of disposable income that goes to saving.
• D) (Total savings)÷ (total disposable income).

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Definitions:

Moral Hazard

The tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.

Diversification

An investment strategy that minimizes risk by allocating assets among various financial instruments, industries, or other categories.

Market Risk

Risk that affects all companies in the stock market.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs).