Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to_________ . Thus the MPC must equal_________ .
A) $7.6 trillion; 0.80
B) $7.8 trillion; 0.80
C) $7.4 trillion; 0.40
D) $8 trillion; 1.00

Question

Quizplus · Accepted Answer

The change in consumption is $7.6 trillion - $6.8 trillion = $0.8 trillion. The change in disposable income is $8 trillion - $7 trillion = $1 trillion. MPC = Change in Consumption / Change in Income = $0.8 trillion / $1 trillion = 0.80.

Suppose Disposable Income Increases from $7 Trillion to $8 Trillion