The "marginal propensity to consume" refers to the additional
A)desired saving that occurs out of an additional dollar of disposable income.
B)desired consumption that occurs out of an additional dollar of disposable income.
C)desired consumption that occurs out of an additional dollar of investment.
D)desired consumption caused by a change in tastes.
E)desired consumption that occurs over time.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the increase in consumer spending resulting from an increase in disposable income. It measures the proportion of additional income that is spent on consumption. Therefore, the correct answer is B, as it refers to the desired consumption that occurs out of an additional dollar of disposable income.

The "Marginal Propensity to Consume" Refers to the Additional