State True or False and justify your answer: An increase in private saving for a closed economy...

Question:

State True or False and justify your answer:

An increase in private saving for a closed economy implies lower consumption in long-run equilibrium and also leads to lower GDP growth.

Marginal Propensity to Consume:

Marginal Propensity to Consume (MPC) is defined as the level of income used by an individual for consumption activities. MPC states that with an increase in the income of the individual, the consumption activities will fluctuate. MPC in an economy added with the savings is always equal to one.

Answer and Explanation: 1

Become a Study.com member to unlock this answer!

View this answer

False

The above statement is false and contradictory with the available facts and information. In a closed economy, the saved money is equal to the...

See full answer below.


Learn more about this topic:

Loading...
Impact of Marginal Propensity to Consume on Individual & National Economy

from

Chapter 7 / Lesson 11
4.5K

The marginal propensity to consume describes the rise of spending on goods rather than savings. Identify how this affects both individuals and the economy at large.


Related to this Question

Explore our homework questions and answers library