Find marginal propensity to save if consumption function is $C= 40 + 0.8y$.

0.2

The correct answer is option (2) : 0.2

C = $\overline{C}$ + c.Y

where C = Consumption function

$\overline{C}$= Autonomous Consumption

c= MPC

Y = Income

Thus, from the given equation, $C= 40 + 0.8y$, we can find out that MPC= 0.8

We know that MPS +MPC=1

MPS= 1- MPC

MPS= 1-0.8= 0.2