Figure 13-6
-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. What is the marginal propensity to consume?

Question

Figure 13-6 Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I<sub>P</sub> = Planned Investment, G = Government Purchases. Further, I<sub>P</sub> and G are autonomous. What is the marginal propensity to consume? A) 0.25 B) 0.5 C) 1.0 D) 2

Figure 13-6 -Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I<sub>P</sub> = Planned Investment, G = Government Purchases. Further, I<sub>P</sub> and G are autonomous. What is the marginal propensity to consume? A) 0.25 B) 0.5 C) 1.0 D) 2

-Refer to Figure 13-6. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. What is the marginal propensity to consume?

Quizplus · Accepted Answer

The marginal propensity to consume is the slope of the consumption function. In this diagram, the consumption function has a slope of 0.5, which means that for every additional dollar of disposable income, consumption increases by 50 cents. Therefore, the answer is B.

Figure 13-6 -Refer to Figure 13-6. Let Y = Real GDP, AE