If two successive levels of disposable personal income are $160 and $190 billion, respectively, and if the change in consumption spending is $20 billion between these two levels of disposable personal income, then the MPC will equal

Question

Quizplus · Accepted Answer

MPC (Marginal Propensity to Consume) is the ratio of the change in consumption to the change in disposable income.

MPC = Change in consumption/Change in income

Here, the change in income = $190 billion - $160 billion = $30 billion

And the change in consumption = $20 billion

So,

MPC = $20 billion/$30 billion = 2/3 = 0.67

Therefore, the correct answer is B) 0.67.

If Two Successive Levels of Disposable Personal Income Are $160