What can be inferred if the marginal propensity to save (MPS) increases?

An increase in the marginal propensity to save (MPS) indicates that individuals are choosing to save a larger portion of any additional income they receive, rather than spending it. This behavior naturally leads to a reduction in overall consumption, as less income is being directed towards purchasing goods and services.

When MPS increases, consumers are effectively prioritizing saving over immediate consumption. As a result, the overall demand for goods and services in the economy is likely to decline. This can have broader implications for economic growth, as lower consumption can lead to reduced business revenues and potentially slower economic expansion.

In contrast, if people were spending more of their income, the MPS would be decreasing, leading to more consumption. Similarly, while it may seem that less income would be available for future consumption, the key aspect of MPS is that individuals are choosing to save more now rather than spend, which definitively supports the conclusion that overall consumption likely decreases with an increase in MPS.