If the MPC is 0.8 and disposable income shrinks by $100 million.Consumption would
A) rise by $8 million
B) rise by $80 million
C) fall by $80 million
D) fall by $8 million
E) fall by $20 million

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) of 0.8 means that for every dollar decrease in disposable income, consumption decreases by 80 cents. Therefore, a $100 million decrease in disposable income would lead to a $80 million decrease in consumption.

If the MPC Is 0