Question

"Economists are generally concerned about the rising Marginal Propensity to Save (MPS) in an economy". Explain why ?

Answer 1

Since the sum of MPC and MPS is unity, any increase in Marginal Propensity to Save (MPS) would directly lead to a decrease in Marginal Propensity to Consume (MPC).

So a decrease in MPC will lead to decrease in consumption which wil decrease the overall aggregate demand of the economy which will lead to decrease in the equilibrium level of income or output.