The marginal propensity to consume is
A)That part of the average consumer dollar that goes to saving.
B)The same as the spending multiplier.
C)The change in consumption divided by the change in disposable income.
D)Always equal to 1.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is defined as the change in consumption divided by the change in disposable income. It represents the proportion of an additional dollar of income that is spent on consumption. Therefore, option C is the correct answer. Option A is incorrect because it refers to the marginal propensity to save, which is the proportion of an additional dollar of income that is saved rather than spent. Option B is incorrect because it refers to the spending multiplier, which is a concept used to calculate the total change in output resulting from a change in autonomous spending. Option D is incorrect because the MPC can be less than or greater than 1, depending on the consumption behavior of individuals.

The Marginal Propensity to Consume Is