If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase?
A) $100
B) $900
C) $1,000
D) $11,000

Question

Quizplus · Accepted Answer

The marginal propensity to consume is defined as the change in consumption divided by the change in income. Therefore, if the MPC is 0.9 and income increases by $1,000, consumption will increase by 0.9 x $1,000 = $900. Therefore, the correct answer is B.

If the Marginal Propensity to Consume Is 0