The marginal propensity to consume is calculated as

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption expenditure relative to the change in disposable income. It is calculated by dividing the change in consumption expenditure by the change in disposable income. Choice A is not correct because it is simply calculating the average propensity to consume (APC), which is consumption expenditure divided by total disposable income. Choice B is also incorrect because it does not take into account the actual change in consumption expenditure. Choice D is not the correct formula for MPC, as it does not take into account the change in consumption expenditure. Choice E is not correct, because dividing the change in consumption expenditure by savings would result in the marginal propensity to save, not the marginal propensity to consume.

The Marginal Propensity to Consume Is Calculated as