Sum of MPC and MPS is equal to :

The correct answer is Option (1) → 1

Any extra income is either consumed or saved. So the part consumed and the part saved together make up the whole of the extra income.

• The marginal propensity to consume (MPC) is the change in consumption per unit change in income (ΔC/ΔY).

• The marginal propensity to save (MPS) is the change in saving per unit change in income (ΔS/ΔY).

• Since ΔY = ΔC + ΔS, dividing by ΔY gives MPC + MPS = 1. For example, if MPC is 0.8, MPS is 0.2.