Suppose a consumption function is given as C = $500 + 0.75Y_D.The marginal propensity to consume is A)200. B)0.75. C)0.25. D)-0.75.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the slope of the consumption function. In this case, the coefficient of Y_D is 0.75, indicating that for every additional unit of income, 0.75 units will be spent on consumption. Thus, the correct answer is B, 0.75.

Suppose a Consumption Function Is Given as C = $500