Question
What is the value of MPC when MPS is equal to zero?
Solution
The value of MPC is equal to unity (i.e., 1) when MPS is equal to zero because whole of disposable income is spent on consumption. Again value of MPC cannot be greater than 1 because change in consumption (i.e., additional consumption) cannot be more than change in income (i.e., additional income). MPS or MPC can not be negative because MPS is ratio between additional saving (ΔS) and additional income (ΔY) and similarly MPC is ratio between additional consumption (ΔC) and additional increase (ΔY). Here the word additional shows positive (+) value.
