Bill's disposable income goes from $100,000 in 2010 to $200,000 in 2011, and his consumption spending goes from $80,000 in 2010 to $140,000 in 2011. Which of the following statements about Bill is true?

Question

Quizplus · Accepted Answer

The MPC (Marginal Propensity to Consume) is the change in consumption spending divided by the change in disposable income. Using the given data, we can calculate Bill's MPC as:

MPC = (140,000 - 80,000) / (200,000 - 100,000) = 0.6

Therefore, the correct answer is C. Option A is incorrect as there is no evidence provided in the question to suggest that Bill's MPC increased. Option B is also incorrect because we just calculated that Bill's MPC is 0.6, not 0.7.

Bill's Disposable Income Goes from $100,000 in 2010 to $200,000