If disposable income increases by $100 million,and consumption increases by $90 million,then the marginal propensity to consume is
A)0.9.
B)0.8.
C)0.75.
D)0.6.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the fraction of an increase in disposable income that is spent on consumption. It is calculated as the change in consumption divided by the change in disposable income. 
In this case, the increase in disposable income is $100 million and the increase in consumption is $90 million.

MPC = change in consumption / change in disposable income

MPC = $90 million / $100 million

MPC = 0.9

Therefore, the answer is A) 0.9.

If Disposable Income Increases by $100 Million,and Consumption Increases by $90