If the MPC is 0.60 and disposable income increases from $20,000 billion to $22,000 billion,consumption will increase by
A)$2,000 billion.
B)$800 billion.
C)$1,200 billion.
D)It is always equal to or greater than 1.

Question

Quizplus · Accepted Answer

To calculate the increase in consumption, we need to multiply the change in disposable income by the marginal propensity to consume (MPC).

Change in disposable income = $22,000 billion - $20,000 billion = $2,000 billion 
Increase in consumption = $2,000 billion * 0.60 = $1,200 billion

Therefore, the best choice is C, as consumption will increase by $1,200 billion.

If the MPC Is 0