If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases
A) saving by $0.20.
B) consumption expenditure by $8.00.
C) consumption expenditure by $0.80.
D) consumption expenditure by $18.00.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) of 0.8 means that for every additional dollar of income, consumption increases by 80% of that dollar. Therefore, a $10 increase in income results in an $8 increase in consumption.

If the Marginal Propensity to Consume Is 0