The marginal propensity to consume is the_________
A) amount saving increases when consumption expenditure decreases.
B) fraction of a change in consumption expenditure that is not saved.
C) fraction of a change in disposable income spent on consumption expenditure.
D) fraction of a change in saving spent on consumption expenditure.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the fraction of a change in disposable income that is spent on consumption expenditure. This means that if a person's disposable income increases by $100 and they spend $80 of it on consumption, the MPC would be 0.8 or 80%. The MPC is important in determining the size of the multiplier effect in the economy.

The Marginal Propensity to Consume Is The_________