Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 1,000 + 0.8Y
I = 1,500
G = 1,250
NX = 100
A)0.2
B)0.8
C)0.9
D)1.8
E)10

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is defined as the change in consumption resulting from a change in income. In this case, since the consumption function is C = 1,000 + 0.8Y, the MPC is the coefficient of Y, which is 0.8. Therefore, the answer is B, 0.8.

Given the Equations for C, I, G, and NX Below