The marginal propensity to consume is the
A) fraction of an extra dollar of GDP that becomes disposable income.
B) share of GDP spent by households and businesses.
C) proportion of an extra dollar of disposable income that is spent on consumption.
D) reciprocal of the average propensity to consume.
E) fraction of disposable income that is consumed.

Question

Quizplus · Accepted Answer

The marginal propensity to consume refers to the proportion of an extra dollar of disposable income that is spent on consumption. It is usually expressed as a decimal or a fraction. For example, if the marginal propensity to consume is 0.75, it means that for each additional dollar of disposable income, 75 cents will be spent on consumption.

The Marginal Propensity to Consume Is the