The additional amount a family spends on consumption from an additional dollar of disposable income is called the
A) saving function.
B) marginal propensity to save.
C) multiplier.
D) marginal propensity to consume.
E) average propensity to consume.

Question

Quizplus · Accepted Answer

The additional amount a family spends on consumption from an additional dollar of disposable income is called the marginal propensity to consume (MPC). This is the proportion of additional income that is spent on consumption, meaning that the higher the MPC, the more the family is likely to spend rather than save.

The Additional Amount a Family Spends on Consumption from an Additional