The MPC and MPS measure changes in consumption expenditure and saving that result from changes in
A) government expenditures on goods and services.
B) disposable income.
C) expected future income.
D) expected inflation.

Question

Quizplus · Accepted Answer

The MPC (marginal propensity to consume) measures the change in consumption expenditure that results from a change in disposable income, while the MPS (marginal propensity to save) measures the change in saving that results from a change in disposable income. Therefore, both the MPC and MPS are measures of the effect of changes in disposable income on consumption expenditure and saving, not the other factors listed.

The MPC and MPS Measure Changes in Consumption Expenditure and Saving