If consumers receive an increase in income of $1,000, their spending will increase by a smaller amount.

Question

Quizplus · Accepted Answer

This is due to the concept of the marginal propensity to consume, which suggests that as income increases, the proportion of that additional income that is spent decreases. Therefore, if consumers receive an increase in income of $1,000, they will not necessarily spend the full $1,000 but rather a portion of it.

If Consumers Receive an Increase in Income of $1,000, Their