If the marginal propensity to consume (MPC) is positive and less than one, an increase in disposable income will _____.
A) increase both consumption and saving
B) increase consumption and decrease saving
C) decrease both consumption and saving
D) decrease consumption but increase saving
E) increase saving, but we cannot predict what will happen to consumption

Question

Quizplus · Accepted Answer

When the marginal propensity to consume (MPC) is positive and less than one, it means that with an increase in disposable income, individuals will spend a portion of that income on consumption and save the rest. Therefore, both consumption and saving will increase.

If the Marginal Propensity to Consume (MPC) Is Positive and Less